The question is not if you will be attacked, the question is what will the consequences be? Cyber insurance has become a hot topic in digital business. Over the years it has grown from simply insurance to a diverse toolkit ready to tackle any attack. A strategic Swiss army knife?
More than just insurance
Cyber insurance policies are meant to cover cyber-attacks of all sorts and to different individual limits, but the real strategic value lies in its extras. The common extras found in modern cyber insurance policies include fines from data protection authorities and offering help to firms in absorbing compliance failure, Chubb (2025). Some cyber policies go as far as covering media liability and brand protection in the event of a major crisis. This coverage essentially extends cyber policies from just cyber insurance to a much broader brand recovery tool. Insurance firms even offer broader third-party liability insurance if your breach or attack exposes customer data or if suppliers hold you accountable for interruptions.
Barriers and Risks
Cyber insurance is not an easy fix, insurers expect their clients to have strong security in place including authentication and encryption. While these standards strengthen the organisations, it is also a barrier to entry for many smaller firms. Abramovsky & Kochenburger (2016) add that insurance companies themselves may pose privacy risks, emphasizing that insurers are potential threats for misuse of data and data breaches. Khalili et al. (2017) further discuss moral hazard because of cyber insurance. Insurance policies are closed on a yearly basis and only beforehand insured companies are screened on their current security measures. Once the insurance is effective, insured parties might drop their security efforts. This makes the insured companies only more prone to cyber-attacks. The cyber insurance industry is developing fast and insurance companies are exploring various ways to mitigate these moral hazard risks.
The rising costs
Lastly, rising costs are affecting the insurance industry in recent years. According to the US Government Accountability Office (2021) cyber-attack costs have doubled between 2016 and 2019. Which has led to an increase in premium for cyber insurance making it much more expensive.
So is it worth it?
Cyber-insurance can be a highly effective strategic tool for companies, but the added value does depend on the company’s size, industry, and level of exposure. For some it might not be necessary, for others it’s a fundamental part of its risk management.
Cyber insurance won’t stop attacks from happening, but it does soften the pain and it helps companies recover faster.
References:
GAO. (2021, May 20). Rising cyberthreats increase cyber insurance premiums while reducing availability. U.S. Government Accountability Office. https://www.gao.gov/blog/rising-cyberthreats-increase-cyber-insurance-premiums-while-reducing-availability
Kanavas, A. (2023). Cyberinsurance as a risk management tool. University of Piraeus Digital Repository.https://dione.lib.unipi.gr/xmlui/bitstream/handle/unipi/16095/Kanavas_MTE2011.pdf?sequence=1
Chubb. (2025). Cyber ERM policy conditions v2.1 [PDF]. Chubb. https://www.chubb.com/content/dam/chubb-sites/chubb-com/international/netherlands/PolisvoorwaardenCyberChubbERMv2.1.pdf
Abramovsky, A., & Kochenburger, P. (2016). Insurance online: Regulation and consumer protection in a cyber world. In M. Ericson, K. Kreimer, & L. P. Stasiak (Eds.), The “dematerialized” insurance (pp. 117–142). Springer. https://doi.org/10.1007/978-3-319-28410-1_5
Khalili, M.M., Naghizadeh, P., Liu, M. (2017). Designing Cyber Insurance Policies: Mitigating Moral Hazard Through Security Pre-Screening. In: Duan, L., Sanjab, A., Li, H., Chen, X., Materassi, D., Elazouzi, R. (eds) Game Theory for Networks. GameNets 2017. Lecture Notes of the Institute for Computer Sciences, Social Informatics and Telecommunications Engineering, vol 212. Springer, Cham. https://doi.org/10.1007/978-3-319-67540-4_6
