Top 8 Questions to Prepare for When Applying for Cyber Insurance

Businesses of all sizes need solid protection for their critical digital assets. Considering cyber liability insurance for your business is a crucial step in safeguarding against both digital and physical risks. In today’s tech-driven world, cyberattacks are a constant threat, and no business is truly safe. So if you’re wondering whether cyber liability insurance is a worthwhile investment, the answer is a resounding yes.

Cyber liability insurance is a vital component of business insurance, which is essential in today's digital landscape for providing comprehensive coverage against various online and technological risks.

The cost of hacking, data breaches, and all other kinds of cyber attacks, including prevalent cyber threats like malware, phishing attacks, and ransomware, can be crippling. Lost sales, remediation costs, legal fees, and even reputational damage can quickly add up. Cyber insurance cover helps offset these costs so you can recover faster, protecting a wide array of cyber threats that businesses face daily, including what it typically includes such as first-party and third-party insurance, and what it pays for in case of a data breach.

Read more about the reasons why you need cyber liability insurance for your business >>

As an insurance professional since 1997, I know how important it is to be prepared. In this article, you’ll find the top 10 questions insurance providers typically ask to help you get the coverage you need.

8 Questions Insurance Providers Ask You To Get Cyber Liability Insurance Coverage

Cyber insurance policies are essential for businesses seeking to mitigate the risks associated with online operations, offering a variety of coverage options to protect against cyber threats. A cyber insurance policy is a critical contract that businesses enter into to safeguard against financial losses due to cyber-related incidents.

Cyber insurance providers typically ask a range of questions to assess the risk profile of the applicant and tailor coverage accordingly, with cyber liability coverage being a key component of what is evaluated. This coverage is crucial for protection against common cyber threats such as malware, phishing attacks, data breaches, and ransomware. Here are the top 8 common questions they will ask. One of the outcomes of answering these questions is receiving a 'cyber liability insurance quote' that matches the business's specific needs.

1. Tell me more about your company

Your insurance provider will gather comprehensive information about your company for risk profile assessment. They’ll ask for basic information about your company - name, industry, and main activities. They will also find out about the scope of your business by asking about the size of your workforce and your annual turnover. It's particularly crucial for small business owners to accurately present the scope of their business to ensure they receive the most beneficial cyber insurance coverage, given their unique vulnerabilities and the critical role of cyber liability insurance in their protection strategy.

2. What is your IT Infrastructure

We will ask you about the software and operating systems you use so that your insurance provider will be able to gain insight into the technological foundation of your operation. They will inquire about the existence of a dedicated IT department or IT staff, as the expertise and resources available to manage and protect your digital assets play a critical role in mitigating risk.

Moreover, we will ask about your company's security measures in place such as the use of key protective measures (consider firewalls, anti-virus software, and encryption protocols), and look for layers of protection that include network security, endpoint security, and data encryption, among others.

3. What are the types of data you collect, your data handling practices, and measures against data breaches

The types of data your company collects and stores will also be considered. This includes sensitive information such as customer data, financial records, intellectual property, and other proprietary data sets. This is important so that your provider will be able to understand the nature and scope of the data you manage and the potential impact of a data breach or loss. Additionally, incorporating cyber liability insurance cover can provide an extra layer of protection against claims arising from day-to-day business operations, including coverage for investigative services, data recovery, and identity recovery in the event of cyber security breaches such as network intrusions, data breaches, and denial of service attacks.

Next, they’ll look at the measures in place to protect this sensitive information. Think of data security protocols, encryption methods, access controls, and any other safeguards used to mitigate the risk of unauthorized access, data breaches, or data loss. This also includes data backup and recovery procedures.

They’ll likely inquire about compliance with data privacy regulations such as GDPR, HIPAA, or industry-specific standards relevant to your operations.

4. Do you have any incident response plans or protocols for cyber risks?

Do you have an incident response plan? Be ready to provide information on the procedures and protocols your company follows in the event of a security incident and provide a structured framework for containing the breach, minimizing its impact, and quickly restoring normal operations. It’s crucial to understand what incident response actions are covered by cyber liability insurance, as this knowledge will guide your preparation and response strategy effectively.

Insurers aren’t only interested in a plan, but also in your organization’s ability to quickly detect and respond to security incidents. They’ll inquire about your monitoring capabilities, including the tools and technologies you use to detect unauthorized access, suspicious activity, or anomalous behavior on your network and systems. They’ll also inquire about the readiness and training of your incident response team, as well as the communication channels established to coordinate response efforts internally and with external stakeholders. Additionally, integrating cyber risk insurance as a financial tool in your incident response plan can significantly support the recovery process by covering the costs associated with security breaches or similar cyber-related events.

5. How did you respond to past cyber incidents?

Your response to past incidents speaks volumes about your commitment to cybersecurity and risk mitigation. Therefore, insurers will want detailed information about the incident, including the cause, the impact on your business operations and customers, and the remediation measures taken after the incident. They'll want to know if you have conducted a thorough post-incident analysis to identify vulnerabilities and gaps in your security posture.

6. Do third-party providers or contracts have access to your network

Insurance providers will inquire about your collaboration with third-party providers or contractors who have access to your network. They’ll want to be aware of the extent of this collaboration and the security measures in place to protect the data shared with these external parties. This includes reviewing the contractual agreements, security protocols, and monitoring mechanisms you have in place to protect the sensitive data entrusted to third parties. Additionally, they will assess the adequacy of third-party coverage in addressing the financial and legal consequences of incidents involving third-party providers, focusing on legal claims and financial losses resulting from claims made by third parties due to a cyber incident.

7. Do you have employee cyber security training?

You can share about any cybersecurity training initiatives for employees and their awareness of potential security risks and best practices. Your insurance provider wants to know the extent to which your employees are trained and equipped to recognize and effectively combat cybersecurity threats. This includes assessing the frequency and scope of cybersecurity training programs, as well as measures to promote a culture of security awareness within your organization.

8. What cyber insurance coverage limits and deductibles are you looking for?

Cyber liability insurance cost is a crucial consideration when determining coverage limits and deductibles. You should know the specific types of cyber incidents that affect your business the most - data breaches, ransomware attacks, phishing scams, insider threats, and other cyber incidents that could disrupt your operations or compromise sensitive information. You can use this information to tailor your insurance coverage to your most important vulnerabilities and risks.

Your insurer will also discuss coverage limits and deductibles to tailor the policy to your risk tolerance and financial capabilities. They’ll explore the level of coverage you require for different aspects of cyber risk, including data breach response costs, legal costs, fines, business interruption losses, and cyber extortion payments. By assessing your coverage needs and budget constraints, insurers can recommend appropriate policy limits and deductibles that strike a balance between comprehensive protection and affordability.

Conclusion

In summary, navigating the cyber insurance landscape requires careful consideration of several factors, including your organization’s IT infrastructure, data handling practices, incident response capabilities, and risk mitigation strategies. By engaging with insurance providers and providing transparent insights into your cybersecurity posture, you can tailor insurance coverage that fits your specific needs and vulnerabilities. Investing in proactive cybersecurity measures, such as employee training, incident response planning, and collaboration with third-party providers, demonstrates your commitment to cyber risk mitigation and improves your insurability. Ultimately, cyber insurance serves as a valuable tool for managing the financial consequences of cyber incidents, providing you with peace of mind and financial protection in an increasingly digitalized world. It's crucial to review your cyber liability insurance policy carefully to understand the coverage, and exclusions, and assess the need for additional coverage to ensure comprehensive protection.

Author’s Bio

Andrew Darlington, an insurance professional with over two decades of experience since 1997, founded Veritas Insurance in 2009. His extensive expertise is underscored by his CBIA, CIC, CRM, and AAI certifications, which reflect his unwavering commitment to maintaining strong client relationships and continuing professional development. A wealth of valuable resources can be found on the Veritas Insurance website, including comprehensive industry insights, insightful case studies, and expert recommendations.