It’s important today that companies are protected against ransomware which can shut down a company’s online system.
With ransomware attacks on the rise, the role of insurance is becoming more robust. And, although ransomware coverage has been traditionally limited within parts of cyber policies, stand-alone cyber policies covering ransomware are becoming more necessary.
To find additional coverage for ransomware, many businesses and carriers have been turning to kidnap and ransom (K&R) policies. K&R policies have traditionally been used by companies to protect their executives, not to protect against ransomware.
And because K&R policies were not designed for ransomware, they may only provide a quick fix. K&R policies tend to be less suitable for ransomware than cyber policies and payouts tend to be lower.
Policy Definitions, Terms, and Conditions
Since cyber insurance isn’t standardized, businesses should review all policy language with a broker before choosing a plan that effectively covers ransomware. Policies can vary significantly in their language and coverage options, so insurance experts recommend policies that—at the very least—provide coverage for extortion demands and payments as well as lost income resulting from an attack.
Organizations should also take a close look at the following definitions, terms, and conditions when choosing a policy:
- Sublimits and deductibles: Most policies set a sublimit for covering ransomware. It is important to review this limit carefully, considering that demands may start on the low side, but can increase quickly. Also, since making a ransom payment may make a company a target for subsequent ransom demands within the policy year, the deductible amount should reflect that risk.
- Payment terms: Most policies require prior written consent before the insured can pay any ransom. This can result in payment delays and increased demands by the hackers. If a company pays a ransom to resume business without prior written consent by the insurer, there is a chance it may not be reimbursed. Therefore, organizations need to be comfortable with a policy’s terms to avoid compromising coverage.
- Definition of extortion: It is important for a business to fully understand and agree with its insurance company’s definition of extortion since the definition dictates the trigger for coverage.
For example, although hackers may intend to sell or misuse information, the ransom demand may only involve a countdown timer and demand for money. While the combination of the two may seem like an obvious threat to the insured, a carrier could possibly deny coverage on the basis that there was no explicit threat to sell or misuse information—all because of its unique definition of extortion.
What to Look For in a Policy
Companies should look for ransomware coverage that uses broad terminology and protects against a wide range of threats, including threats to do the following:
- Access, sell, disclose, or misuse data stored on your company network, including digital assets.
- Alter, damage, or destroy software or programs.
- Introduce malicious software, including viruses and self-propagating code.
- Impair or restrict access. Look for policies with broad terms like “threats to disrupt business operations.”
- Impersonate the insured in order to gather protected information from its clients, also known as pharming or phishing.
- Use your network to transmit malware.
- Deface or interfere with your company’s website.
The Importance of Risk Management
Ransomware insurance is most effective when coupled with an effective risk management program, as there are many components in the fight against cybercrime. Business owners and managers should work with an insurance broker to review all applicable options before choosing the cyber coverage for them.
The National Ground Water Association understands that your company needs the right type of insurance coverages. Go to the NGWA webpage to find out more information about companies it has partnered with.
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