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What is Cyber Insurance?

As businesses increasingly depend on the internet, many are seeking protection from losses related to outtages and hackers.
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Why Do Companies Want It?
Businesses today can be made or broken through how well their website or Internet infrastructure works. A single day outage on a major online retailer could cost the company millions.

This is doubly true if an online shopping site were to go down on a major shopping holiday like black Friday or Cyber Monday. Shopping sites aside, most companies today rely on some form of online infrastructure. That's why a new kind of insurance is starting to hit the market. This new type of product is known as cyber insurance.

So What is "Cyber Insurance" Anyway?
While there is no single product known as cyber insurance, the general idea behind the concept is that it's a type of protective product that pays out in the event of the financial loss related to any kind of failure of Internet or network equipment.

A simple example would be like we just mentioned-if an online retailer experiences an outage and loses sales as a result. In an event like this, cyber insurance could help mitigate the losses incurred.
Hackers Are a Growing Threat
As the world becomes increasingly dependent on Internet infrastructure, many opportunistic hackers have taken advantage. Specifically, an increasing number of reports have appeared wherein hackers will effectively take a website or a company hostage and demand payment.

One recent example of this was the massive outbreak of so-called ransom where. The most virulent of which was the one outcry virus. The virus would surreptitiously encrypt all of the files on an infected computer. Once the majority of files were encrypted, the user of the machine would be presented with a message telling them that all their files are encrypted, and the computer is now inaccessible. To unlock the data and regain control, the victim would need to pay a ransom.

In cases like this, it's conceivable that cyber insurance would again be able to help mitigate potential losses due to this type of attack.
A New Frontier
Even though most major companies have invested heavily in online infrastructure already, the idea of cyber insurance is still relatively new. As a result, it is far more experimental and not all insurance carriers are offering it. Also, the cost of acquiring cyber insurance could rapidly fluctuate because the insurance companies providing it are unlikely to have vast fields of data to draw from upon which they can determine what is or isn't a fair price for the insurance premiums.

It does, however, seem inevitable that over the coming years, products that resemble what we know today as cyber insurance will likely become ubiquitous. Perhaps even private individuals will seek such protection as their lives become increasingly dependent on their digital counterparts such as their digital identity, or online financial data.