The 3 Reasons Why Using Your Cyber Insurance in a Breach is the Worst Thing You Can Do
The cybersecurity landscape for businesses is more volatile and unpredictable than ever. Companies of all sizes are constantly threatened by cybercriminals, with data breaches potentially lurking around every corner. In response, many organizations have turned to cyber insurance as a safety net, hoping it will cushion the blow if their defenses give way. However, relying on cyber insurance in the aftermath of a cyber incident can have significant downsides. Let’s explore the three primary reasons why using your cyber insurance in a breach might not be the protection you think it is.
Higher Premiums
First and foremost, the financial ramifications of claiming cyber insurance can be severe. Following a breach, companies that make a claim can expect their insurance premiums to skyrocket. According to an article from CRN, premiums for cyber insurance saw a significant spike in 2020 and 2021 due to an onslaught of ransomware attacks, a trend that will likely continue as threats evolve. When a company files a claim, it’s signaling to insurers that it’s a higher risk. This event leads to increased costs and will limit the scope of future coverage, making comprehensive protection more challenging to obtain.
Reputational Damage
The second reason to think twice before using your cyber insurance is the potential for reputational damage. When a breach occurs, the focus should be on damage control and maintaining customer trust. However, filing a claim might require disclosing the breach publicly, which can lead to reputational damage. Customers and partners may lose confidence in the business’s ability to protect their data, leading to lost business and partnerships. A study revealed that companies that suffered a data breach saw a significant decline in customer trust, with 65% of breach victims losing faith in the organization. This reputational hit can be long-lasting and more costly than the immediate financial impact of the breach itself.
Potential Legal Implications
Finally, there are potential legal implications to consider. Using your cyber insurance might seem like an easy way out, but it could complicate legal matters. Filing a claim often involves a thorough investigation of the incident, which could uncover legal liabilities or compliance issues that the company wasn’t previously aware of. Non-compliance can result in hefty fines, further adding to the financial burden of the breach.
The Mission-Critical Approach
Facing a cyber breach is undoubtedly a mission-critical moment for any organization. While cyber insurance can play a role in a comprehensive cybersecurity strategy, it should not be the first line of defense in the wake of a breach. Instead, companies should prioritize robust cybersecurity measures, regular employee cybersecurity awareness training, and developing an effective incident response plan. In the event of a breach, seeking advice from technology providers with expertise in cyber risk management, like GB Tech, can provide the guidance needed to handle the aftermath strategically and protect the organization’s future.
It’s not just about recovering from a breach; it’s about making your cybersecurity framework so resilient that attackers find it nearly impossible to penetrate so you don’t have to use your current cyber insurance. That’s the mission-critical approach needed in today’s environment.
