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Shopping for cyber insurance? Six questions to ask before calling the insurer

The cyber threat landscape has always been worrisome, but today there are many more CISOs noticing new grey hairs in the mirror, given an anticipated uptick in cyber-attacks from nation-states and other bad actors.

Ransomware attacks and other forms of account compromise continue to grace the news every month, with malicious actors, state-sponsored or otherwise, potentially costing companies millions in downtime and lost opportunity. There are also serious reputational risks for vendors who might see customers flock to a competitor after a publicised attack.

These attacks have broken the old cyber insurance risk models because it's become too easy for an attacker to steal credentials and work from the inside. They use relatively simple technology but can cause serious damage through days of downtime, even more than a classic breach or reputation damage. These developments have far-reaching implications across the entire insurance industry, from the insurers to the brokers, to the insured themselves.

Due to a heightened risk profile caused by recent events, cyber insurance premiums have skyrocketed, going up by 150-300 per cent in some cases. So, it's no surprise that this increased-threat environment has inspired a quick uptick in cyber insurance interest as firms either consider signing up for the first time or seek to increase liability coverage.

The cyber insurance industry is still developing in response to all the new threats coming from novel sources. However, the basic tenet of insurance still holds: Those companies at the highest risk will pay the highest premiums – or might not qualify at all.

Asking the right questions

What can companies do as their “homework” before approaching cyber insurance providers? How do they put themselves in the best position to negotiate reasonable premiums on a policy that will pay out if the worst happens? It is worthwhile going through this checklist first before investing in a policy:

1. What are the minimum-security requirements of the insurer?

Most quotes for cyber insurance will come with a cyber risk vulnerability report. It will be billed as a report beneficial to assessing the risk, but of course, it's in the insurer's interest to find any glaring weak links in an organisation's armour. While minimum requirements will vary, they will likely closely mirror what is included in the Australian Cyber Security Centre's (ACSC) Essential Eight.

These are eight strategies to mitigate cyber security incidents, and implementing them effectively helps achieve a baseline cybersecurity posture. One of the eight strategies calls for the implementation of phishing-resistant MFA authentication.

You can be sure that simple password authentication isn't going to be enough to meet cyber insurers' minimum requirements because the risk is too high for them. So before asking for a cyber insurance quote, it makes sense for companies to grade themselves against the Essential Eight first.

In the past, a signed attestation from the company's CISO that minimum standards were in place was sufficient. However, for high-liability or high-risk policies, some insurance firms may now need proper due diligence to go any further.

2. How fast can organisations implement more robust authentication?

If cyber insurance is something an organisation needs immediately, it may not have the time to wait for a full cycle of security upgrades. It's worth asking what security practices, hardware-based authentication or increased employee training they can do today to make their security profile more attractive to cyber insurers?

3. Has the pandemic weakened a company's security profile because more people log in from home? 

Many companies' pre-pandemic focused security efforts had the office locations set as the boundaries. But as so many remote workers now either work permanently remotely or in a hybrid manner, tightening the organisation's grip on security has become a lot more complicated.

There is more risk because there are many attack vectors, and cyber insurers are acutely aware of this. It is not enough to focus on firewalls, web proxies, and data protection – today, robust MFA for those logging in remotely must be part of the picture.

Attackers aren't breaking in, they're logging in, and compromised credentials are at the root of 65 per cent of cybersecurity incidents, according to the Office of the Australian Information Commissioner's (OAIC) Notifiable Data Breaches Report for July-December 2021. Raising the security bar for user authentication beyond passwords is imperative.

4. Will a policy payout when something bad happens? 

This is a legal question and still developing but keeping up with court cases that lay down precedent on these issues is key. It's no secret that insurance companies stay in business by NOT paying out when they don't have to or by keeping their payouts low. Therefore, it is important to carefully document all downtime and losses from the first day of a breach or other incident.

Some good news is a recent ruling on a $1.4 billion attack on the global pharmaceutical company Merck from Russia. Even though the attack was pointed at Ukraine in 2017 (a grim reminder of the physical invasion to come), the court ruled that it was not an “act of war or terrorism,” Therefore, a payout could not be excluded.

Insurance companies will try to limit their losses by breaking up covered items into categories. For example, losses due to downtime, hardware and systems replacement, ransomware payout and identity protection for affected customers may have been covered in a single bundle before, but today they are likely to be itemised. That makes policies more complex, requiring brokers to shop around for reinsurers to spread the risk.

5. Have we done a full cybersecurity review recently? If not, how do we do it? 

Risk assessments should be carried out on a standard schedule, including both internal and external threats. It can start with a comprehensive review of user access, which identity access management (IAM) system an organisation uses, and what kind of anti-phishing user education they have employed or plan to employ. A review should look closely at privileged users, critical staff and admins, but it should not exclude users. The safest end goal will be to at least start on a path toward strong MFA authentication for all users.

Organisations should review their cybersecurity posture in line with the Essential Eight. They can bring this information into conversations with insurance brokers, which will put them in a stronger bargaining position when they negotiate cyber insurance premiums.

6. Is the cyber policy specific about what is covered and what will be paid out? 

Boilerplate policies are never good because each firm will have specific threat vectors and, most likely, scenarios for how an attack would happen. Businesses taking out a cyber policy should make sure there are enough specific references to the organisation's vulnerabilities and that they are satisfied with how third-party liability is considered.

In general, the more specific it is in terms of what falls under covered attacks, the better. Note: This is when having a proper legal advisor, preferably with cyber insurance experience, would help. What we say here shouldn't be taken as legal advice to follow.

These six questions are only a starting point for cyber insurance research, but it's a good foundation to consider how to get the best deal on premiums and the most comprehensive protection for the years ahead.

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