How many of you are familiar with the famous 2022 Tesla Hack? David Colombo, a 19-year-old white hacker from Texas, gained access to 25 Teslas in 13 countries. He disabled the security systems, manipulated the car controls and even played Rick Astley through Bluetooth speakers. With the help of an unsecured third-party software called TeslaMate, he controlled these car functions via Tesla API’s. One of the Tesla owners complained that their car was doing donuts in the backyard and blasting La Bamba at 3AM. When TeslaMate learned about this hack, it immediately prevented remote access by unauthorized users. While this incident seemed straight out of a science fiction movie; it raised serious concerns about evolving cyber risks. What about the users who were affected by this hack? Did they receive any claim? Now, here’s the catch. Tesla offers insurance coverage of $15,000 for identity theft only if it's committed through their cyber networks. However, it does not offer any coverage for third-party data breaches.
In today’s world, cyber risks are evolving at lightning speed. Every industry is susceptible to cyber threats and security breaches. However, the insurance market has not evolved at the same pace to address new cyber threats. This is because the scope of cyber-risks is not well-defined in the insurance paradigm. Insurers find it challenging to calculate the accurate costs of cyber insurance policies, given the unpredictable nature of the risks. On top of that, they fail to account for silent cyber risks. Silent cyber risks are exposures that are neither included nor excluded in non-cyber insurance policies. According to a report by IMF Cyber Risk Market Failures and Financial Stability, silent risks constitute 90% of total cyber exposures. Despite having internal cybersecurity capabilities, companies struggle with the issue of silent risks, exposure and risk transfer. This is partly due to the convoluted nature of cyber risk policies. They are highly technical and often standardized into a single offering model. Some companies provide stand-alone polices. While others combine cyber insurance with their current offers without making a clear distinction.
In the ever-changing insurance landscape, finding the right cyber insurance policy is a herculean task. This is where a cyber insurance broker comes into the picture. These are experts that offer specialized lines of coverage to meet specific risks and client needs. Not all cyber insurance policies are created equally. With zero insight or specialized knowledge, companies cannot access the right market for specific cyber risks and get the best deals. On the other hand, cyber insurance brokers have widespread access to specialized cyber markets. They have connections to a broad range of vendors to guide the enterprises with key risk management services.
Before we explain how cyber insurance brokers manage risks, let’s understand why companies need a cyber insurance policy.
What are the Key Drivers for Cyber Insurance?
Cyber insurance brokers offer coverages in nine major areas, keeping in tandem with company’s security measures:
- Evolving threat landscape due to proliferation of technologies like cloud, Artificial Intelligence (AI), Internet of Things (IOT), smartphones and social media.
- Data loss, identity theft and security breaches
- Remediation costs for responding to data breaches
- Regulatory penalties, fines and settlement costs
- Cyber extortion
- Computer hacks
- Telecommunications fraud
- Misdirected payments and liabilities
- Network security threats
However, a cyber insurance policy does not help organizations in:
- Protecting organizations from reputational risks
- Removing risks
- Offering a replacement for an information security program
How Cyber Insurance Brokers Help in Risk Management?
Every cyber threat is unique in its complexity. Cyber insurance brokers map cyber risks, build cost-effective strategies for risk transfer and assist organizations to file claims. For instance, imagine there is an IT company called Hypothetical Inc that has in-built cyber security measures to safeguard their systems, reputation and finances. It collaborates with an insurance broker to develop a policy that protects them from risk exposures. Despite its best security standards, the company becomes a victim of a cyber-attack. One of its employees receive a mail that appears to be from a customer. When they click on the mail, they download a ransomware that encrypts all of Hypothetical Inc’s customer’s data.
When the executives come to know about this incident, they immediately contact the insurance broker. The broker comes up with up a quick plan to respond to the attack. They coordinate with the company’s insurer to file an immediate claim.
The insurer builds a team of experts from technology, forensics, law enforcement and public relations. They come up with quick remedies to lessen the impact of the attack. If that’s not all, they even help the company to implement its insurance policy created prior to the attack. During the response stage, the insurance broker works with the insurer to process the claims efficiently.
Eventually, Hypothetical Inc gets access to its customer data. However, the team of specialists created by the insurer still works on the case. They implement a “multi-month cleansing process” to remove any harmful software from the company’s network systems. At the same time, they amend Hypothetical Inc’s security policy to include employee training on best practices of cybersecurity.
The cyber insurance broker must engage with Hypothetical Inc for regular post-mortem examination. They must consistently re-evaluate its system weaknesses and approaches for risk transfer.
How Exdion Enhances Cyber Insurance Policy Checking?
According to a recent report by Hiscox, 70% of the companies across worldwide reported 1 or more incidents of cyberattacks. Since cyber insurance policies are lengthy, checking them manually for mistakes is cumbersome and error-prone. You need automated risk management solutions to quickly address cyber risks and issue cyber insurance policies.
At Exdion, we optimize risk assessment for cyber insurance policies, collect industry-specific insights and minimize your exposure to risk. Our Exdion Policy Check automates the E&O risks through Artificial Intelligence (AI) and Machine Learning (ML) and reduces the time for manual policy checking.
Streamline your cyber risk management practices in less than 24 hours! Get in touch with us today.