Cyber insurance is now a requirement for banks and credit unions to safeguard against cyber-attacks. However, it's important to recognize that cyber insurance coverage may not always provide the expected protection, leaving credit unions exposed to financial risks. This article explores the gaps, exclusions, and denied claims in cyber insurance coverage and their implications for credit unions.
The Costly Consequences of Cyber Attacks:The average cost of a data breach in 2023 was $4.45 million per incident. This financial impact can be devastating, leading to bankruptcy for many businesses and financial institutions.
For instance:
- 93% of companies that lost access to their data center for more than 10 days due to a disaster filed for bankruptcy within a year.
- 94% of companies suffering a catastrophic data loss do not survive, with 43% never reopening and 51% closing within two years.
- 7 out of 10 small firms experiencing a major data loss go out of business within a year.
- 43% of cyber-attacks target small and medium-sized businesses, and half of SMBs have experienced an attack in the past year.
The Importance of Cyber Insurance:
Given the severity of cyber risks, credit unions and banks now require cyber insurance. However, it's crucial to understand that cyber insurance may have gaps and exclusions, leaving credit unions vulnerable.
Coverage Gaps and Exclusions:
Cyber insurance policies often exclude critical attack scenarios where policyholders need protection the most. These exclusions may encompass omissions, lack of security protocols, non-compliance, human error, internal bad actors, acts of war or terrorism, and failure to report incidents promptly.
Partial Payment and Excluded Costs:
Cyber insurance policies rarely cover all costs associated with a cyber attack. Incident response, public relations communication, and crisis response expenses may not be covered, placing a financial burden on affected businesses.
The Challenge of Denied Claims:
Insurance companies employ outside security experts during the incident response process. Failure to meet cyber insurance mandates and compliance requirements may lead to denied claims or reduced payouts.
The Role of Automated Monitoring:
Automated monitoring and continuous assessment of security measures are vital for effective cyber insurance risk management. This approach offers benefits such as precise premium calculations based on current cyber risk data, streamlined processes without lengthy questionnaires, enhanced infrastructure security through actionable vulnerability information, and reduced risk of denied claims by maintaining compliance with security policies.
While cyber insurance is essential for credit unions, it's important to recognize the gaps, exclusions, and denied claims that could leave them exposed to financial risks. Implementing automated monitoring and maintaining compliance with cyber insurance mandates can significantly reduce these risks, ensuring better protection for credit unions and policyholders alike.
Based on info from: CUSO Magazine
