Let’s start with what you already know. Businesses like yours are increasingly becoming targets for cyberattacks. Businesses that are attacked face significant financial losses, reputational damage, and operational disruptions. Cybersecurity insurance is now a requirement, and rates have been going up.

So if you’ve invested in reasonable security infrastructure and have a cybersecurity insurance policy, you’re set, right? Not quite. The fine print of cybersecurity insurance policies often contains clauses and rules that can catch businesses off guard, leading to unforeseen expenses and complications during recovery efforts.

Approval Required Before Beginning Recovery

One of the hidden costs of cybersecurity insurance is the requirement for insurance company approval before initiating recovery efforts. In the aftermath of a cyber incident, time is of the essence. Businesses need to act swiftly to contain the breach, restore systems, and mitigate damages. However, many insurance policies stipulate that businesses must seek approval from the insurer before taking any action.

Because these insurers deal with so many attacks, they know that the success of recovery efforts can depend greatly on the order in which tasks are performed. If a task is performed in the wrong order, it can greatly increase the time and cost of recovering from an attack. As a result, if you begin recovery efforts without contacting your insurance company, they can refuse to cover the costs of the attack.

Make sure contacting the insurance company is one of the first actions your business takes after an attack and that recovery efforts are not started until you have received approval from the insurance company. This may mean your business is offline longer than you like, but it will save you from having your entire claim denied.

Use of Approved Vendors

While insurance policies typically cover the costs of hiring cybersecurity experts to assist with recovery efforts, they may require you to select from a list of pre-approved vendors. If you use an expert who isn’t on the approved list, your claim could be denied.

If you contact your insurance company immediately after an attack, you can ask for their list of approved vendors and start making phone calls. If you want to be proactive, ask for the list now. If you are using a managed services provider like Clare Computer Solutions, they may already have a working relationship with one or more of the vendors, which will make the process of choosing a vendor much easier.

Limits on Recovery Hours

Cybersecurity insurance policies often impose limits on the amount of recovery hours that will be paid for. In the event of a cyber incident, the policy is designed to cover expenses related to forensic investigations, system restoration, legal fees, and regulatory compliance. However, if your infrastructure isn’t up-to-date or adhering to industry-standard practices, it will likely take more time than normal to recover. Insurance coverage will be capped at a predetermined number of hours based on a standard, up-to-date environment, leaving you to foot the bill for any additional time spent on recovery efforts.

Steps to Avoid These Hidden Costs

    1. Thoroughly review policy terms – Carefully review the terms and conditions of your policy, paying close attention to clauses related to recovery procedures, vendor restrictions, and coverage limits. It’s essential to understand the extent of coverage provided and any potential limitations that may impact the ability to recover effectively from a cyber incident.
    2. Incorporate policy requirements into your disaster recovery plan – When an attack occurs, you won’t have time to read your insurance policy. Take the time now to update your disaster recovery plan to conform to the requirements of your policy. If your first call is to your lawyer, your second call should be to your insurance company. Employees will want to take action to fix things. Make sure your staff know they cannot begin recovery efforts or call recovery experts until given approval by the insurance company.
    3. Assess vendor restrictions – Evaluate the quality, expertise, and cost-effectiveness of approved vendors compared to other options available in the market. Work with your managed services provider to ensure they have working relationships with approved vendors.
    4. Invest in risk mitigation measures – While cybersecurity insurance provides financial safeguards against cyber risks, it should not be viewed as a substitute for robust cybersecurity measures. Invest in proactive risk mitigation strategies, such as employee training, network security enhancements, and data backup solutions, to reduce the likelihood and impact of cyber incidents.

By understanding policy terms, vendor restrictions, and coverage limits, businesses can better prepare for cyber risks and mitigate the financial impact of cyber incidents. Because these policies assume you have a robust, up-to-date security infrastructure, you also need to continue to invest in comprehensive cybersecurity measures to bolster resilience and minimize the likelihood of cyberattacks. If you’re doing these things, you’ve prepared well to help your business avoid the hidden costs of cybersecurity insurance.