Cyber insurance is, as the name would imply, an insurance service which is used to protect individuals and enterprises from information technology and Internet related risks. Cyber insurance policies protect the users in situations such as data loss, extortion, illegal obtainment, hacking, and other methods of online harm.
The purpose of cyber-insurance in economical terms is to protect the client’s welfare once methods of cyber defense have failed.
The reason why organizations need cyber insurance is because despite the advances in cyber defense technologies and methods, there still are vulnerabilities which can be exploited with the right amount of skill and knowledge, especially considering the amounts of wealth and sensible information online, and the legislative issues with the prosecution of cyber criminals. As a result, existing security problems cannot be resolved through technological means alone. This led to the need of protecting the Internet users standing through other means, the foremost among them being the cyber insurance policies (Shetty, Schwartz, Felegyhazi & Walrand, 2010).
When a company begins to build itself a framework on how to effectively employ the cyber insurance products and services, it has to make some fundamental decisions to maximize the efficiency.
First of all, the company needs to assess the risks that can result from the adverse tempering with its data assets. This involves determining the treats and corresponding vulnerabilities, and prioritizing them according to severity of danger. This would allow the company to address the gaps in defense more efficiently. Secondly, the company would need to make sure its existing insurance coverage covers all of the potential threats as well. Any gaps found during this process would need to be addressed. Thirdly, the company would need to assess its cyber insurance providers to determine their validity. Lastly, the company should chose insurance contracts based on whether they address the discovered issues or not (Whitman & Mattord, 2011).
While it was originally predicted that cyber insurance would turn into a major industry, it never reached those heights. This is mainly the result of people’s inability to objectively assess the cost of damage to information data, as well as general inexperience of both IT and managerial staff with the concept.
With this new data in mind, the current prediction is that cyber insurance will remain in its current expensive, underutilized state, until a better understanding of data risks is achieved.
Most industries attempt to apply risk assessment techniques and tools from other, already established industries, to cyber insurance. This, naturally, creates major gaps in the understanding of the situation, as inadequate tools are used for the purpose. Instead, while it seems to be much more costly and time consuming, it would be much more useful to research the issues objectively, in order to find industry-unique approaches that account for the erratic nature of the Internet attacks.
However, few businesses are willing to go to this much effort, and prefer the more traditional, if not entirely appropriate, methods of collecting and analyzing risk.
Due diligence is the level of preparation in the IT sphere, that is to be expected due to being reasonable or traditional. Due diligence can be used as an alternative method of risk assessment by comparing the current methods used by the company against the methods used by other successful firms. Examples of due diligence include a company voluntary taking on standards to improve the quality of work, while originally those standards were only imposed by law on other organizations or industries.
Risk-based information security is the approach to data security is based not on how the risks are perceived by the company, but on how the whole industry perceives these dangers.
It also involves integrating security concerns into other, not security-related business processes (Palmer, 2012).
References
Palmer, M. (2012). Security Think Tank: A risk-based approach to security is key to business alignment. Web.
Shetty, N., Schwartz, G., Felegyhazi, M., & Walrand, J. (2010). Competitive Cyber-Insurance and Internet Security. Economics of Information Security and Privacy, 229-247. Web.
Whitman, M. E., & Mattord, H. (2011). Reading & Cases in Information Security: Law & Ethics. Boston, MA: Course Technology, Cengage Learning.