Is cyber security insurance really worth it?

An industry leader has just addressed the situation surrounding cyber security and the insurance that comes with it.

Leon Fouche, partner and national leader of Cyber Security at advisory firm BDO, says that while cyber-attacks and data breaches are an increasing concern, selecting the right cyber insurance policy can be more complicated.

"We are seeing discussions about how to manage cyber risk starting to get momentum in the boardroom, and that is entirely appropriate," says Fouche.

"If you are a business owner or key decision maker, you need to first understand whether cyber insurance is right for your business, and if so, which policy best suits your needs. To achieve this, you need a thorough understanding of what risks you truly face," he adds.

"The cyber insurance market is evolving, and due to the lack of reliable data about the cyber security trends in local markets, insurance companies are limited in their ability to develop robust risk modelling for the costs of cyber-attacks. They mitigate this by having restrictive terms and exclusions in their cyber insurance policies.

Fouche also mentions that there are a number of steps businesses can take to help understand the risks and the cyber insurance coverage required.

The first step Fouche says, is to undertake a risk assessment to understand a business' current cyber risks, then quantify these risks and model the potential impact they would have on the business.

"For instance, you need to understand what the financial impact is if your organisation suffered a data breach," he says.

"Make sure you evaluate risk exposures and assess whether you are comfortable with the level of risk to your business — perhaps you need to get cyber insurance to cover this," adds Fouche.

"Then, evaluate cyber insurance policies for those risks you can't remediate, and select a policy that provides the cover you need.  As a final check, you need to validate if the insurance policy will provide you the required cover by looking at cyber-attack scenarios to confirm that the policy would respond to claims for those scenarios.

In a bid to help the market understand the cyber security challenges that businesses and organisations face, BDO has teamed up with AusCERT, the Australian cyber emergency response team.

The two organisations will work together to conduct an in-depth cyber security industry survey. Thomas King, general manager at AusCERT, says benchmarking is an important step in getting it right.

"This survey will help to identify current cyber security trends, issues and threats facing businesses in Australia and New Zealand."

To participate in the survey, head to BDO's website.