Cybercrime will cost the globe’s businesses more than $2 trillion by the year 2019, according to a report from UK-based market analyst firm Juniper Research. It’s hardly a surprise that so many companies include cyber threats at the top of their list of risks. And yet shockingly few have taken adequate measures to mitigate the potential dangers of data breaches and other cyber-related risks. Until now, that is. The Wall Street Journal recently reported on a trend within the manufacturing industry toward widespread adoption of cyber insurance. Here’s a closer look at the issue, along with why cybersecurity insurance offers critical protection for 21st century businesses.
A Rising Threat
The Wall Street Journal shared the story of a “massive attack” on a steel plant in Germany which “highlighted how cyberattacks can be more destructive than prosaic events like floods that are covered by typical P&C policies.” In the U.S., meanwhile, a company was recently dinged by the FDA for cybersecurity threats pertaining to medical devices acquired during a recent acquisition.
And these were hardly isolated incidents. Explains Daniel Steiner, enterprise risk manager at Kimberly-Clark Corp., “There’s certainly an increased exposure in the industry overall, especially with more reliance on cloud providers, greater sophistication of hackers globally, and increased consumer interactions through social media.”
Why Cybersecurity Insurance Matters
While cyber insurance was previously the domain of “consumer-facing business” attempting to safeguard against consumer data theft, the need has crossed over into the manufacturing sector. In fact, based on a report from insurance consulting firm Advisen Ltd., the Wall Street Journal reveals, “Manufacturers paid $36.9 million in premiums for cyber-specific policies in 2016,” — a staggering 89 percent increase over the previous year.
Not only that, say experts, but as factories becoming increasingly connected, the importance of network security will only continue to grow. And yet, according to the 2016 Travelers Risk Index, while cyber risks are a top concern for today’s businesses, “close to two-thirds of businesses surveyed reportedly have not taken basic prevention measures, such as providing employee data protection education and practices or creating a cyber/data breach incident response plan. ”
Selecting a Cybersecurity Policy
In addition to the implicit value of cybersecurity insurance, the act of selecting a policy is in itself a strategic process. As Brent Pickens, director of global risk management at plastic packaging maker Bemis Co. Inc., told the Wall Street Journal, “You get the best return out of [insuring] what is most important for you.”
The good news? Cyber security insurance is a relative bargain when compared to more expensive industries, like banking and retail. But this also means companies have even less of an excuse to drop the ball when it comes to coverage. Alliant Insurance Services’ Michael Blake told The Wall Street Journal, “There is not a risk manager out there who wants to walk into a board meeting to explain why he didn’t think to get a cyber insurance quote, especially since it’s so cheap.”
All of which begs the question: Where does your company stand when it comes to cybersecurity measures and other proactive prevention tactics?