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Only a third of UK organisations have insurance that covers them for security breaches and financial impact of data loss, a survey shows.
The survey also shows that only 29% of firms have dedicated cyber insurance in place, despite 81% of senior executives polled saying it is “vital” their organisation is insured against data breaches, according to the Risk:Value 2018 report by NTT Security.
However, the survey, conducted by Vanson Bourne, also shows that nearly half of senior executives are not aware of what their company insurance covers.
The report, which looks at the attitudes of 1,800 global senior decision-makers from non-IT functions to risks to the business and the value of information security, reveals that UK businesses would have to spend £1m, on average, to recover from a breach.
While the UK compares poorly with other markets such as the US and Singapore (53%) when it comes to insuring against information security breaches and data loss, it fares better than Benelux (27%) and the Nordics (23% in Sweden and 28% in Norway).
The UK also ranks second from last for having dedicated cyber insurance, alongside Germany (29%) and just above Benelux (27%).
Just 6% of UK respondents said their company insurance covers only information security breaches, while 11% are covered only for data loss. However, the fact that nearly half (45%) of those surveyed do not know if their company insurance covers either of these is a concern, the report said, given that it is the highest figure for any of the countries in the report and well above the global average of 23%.
Kai Grunwitz, senior vice-president for Europe at NTT Security, said: “With estimated annual losses from cyber crime now topping $400bn (£291bn), according to the Center for Strategic and International Studies, you would hope more organisations would be beating a path to insurers’ doors. But while the insurance sector is certainly seeing growth in the number of policies being taken out to cover such losses, it’s an issue that many senior decision-makers are not on top of.”
According to figures, the number of insurers now offering cyber insurance via Lloyd’s of London has leapt to more than 70, nearly double the number a few years ago, while insurance giant Allianz predicts that global cyber insurance premiums will grow to $20bn by 2025, up from around $3bn to $4bn currently.
Kai Grunwitz, NTT Security
According to the NTT Security report, half of respondents in UK organisations believe a failure to maintain or apply updates to existing IT systems would or could invalidate their company insurance, while 37% point to lack of compliance with industry regulations, including the General Data Protection Regulation (GDPR), which came into force in May.
While 63% of respondents in the UK said they have an incident response plan in place, and another 18% are in the process of implementing one, 38% agreed that the lack of an incident response plan could or would also invalidate their company insurance.
Incident response is a basic requirement of best practice security and is even more important with the GDPR mandating 72-hour notifications following a breach, the report notes, adding that the GDPR and Network and Information Systems (NIS) Directive both require organisations in one way or another to follow best practices in cyber security, threatening huge fines of up to £17m or 4% of global annual turnover for non-compliance.
“While cyber risk insurance should be put in place to help mitigate the potential fallout of a data security breach, a policy must not be seen as a ‘get out of jail free’ card,” said Grunwitz.
“Cyber insurance must be complementary to an effective risk-based information security strategy, not a replacement for it. You wouldn’t expect your house insurance provider to pay out if you were burgled when the doors and windows were left unlocked. So don’t expect a payout – or indeed an insurance policy – if you haven’t put in place the right processes and policies,” he said.
Read more about cyber insurance
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