Cyber Risk

Is Cyber Risk Insurance Right for Your Business?

by Kevin Beaver Friday Apr 23, 2010

Linda Tucci recently wrote an interesting piece for SearchCompliance.com: Interest in cyber risk insurance is growing, but is it for you? When I saw the headline I laughed out loud. Not because of what Linda wrote but because of the humor in how the marketing machine works in IT. Cyber risk insurance, essentially a policy that protects your business when there’s an IT security meltdown, was all the rage back in the dot-com era…then it sort of went away. Due in part to the dot-com bust and the fact that many businesses just didn’t see the value in it. Now it’s back!?

This “renewed” interest in cyber risk insurance reminds me of the silly hype over “cloud computing.” Cloud computing essentially refers to a Web-based service, like Google’s Postini email filtering service or Dropbox that’s offered as a service on the Web (as opposed to, say, Microsoft Office, which resides on your hard drive). The cloud crowd proclaims this to be the next big thing in computing. But guess what? Businesses providing Internet-based services have existed for nearly two decades. I remember using the original version of Visio (a technical drawing/graphing/programming program) a bunch in college in the early 1990s. Visio had a “cloud” that represented a computer network which went on to represent the Internet in later versions. The cloud has been transformed by the marketing machine but it really hasn’t changed.

The early cloud computing companies were known as “application service providers”; many went bust along with the dot-com bubble. The survivors then morphed into “managed service providers,” then “software-as-a-service” providers. It makes your head spin trying to keep up! Funny how, if one marketing strategy doesn’t work, then it just gets rebranded into something new: same old stuff, new packaging. Cloud computing is the poster child for this right now. I suppose the familiar “cloud” from the early Visio days is finally getting the recognition it deserves.

Getting back to cyber risk insurance: it’s a policy businesses can take out to minimize the risk associated with security breaches, system outages and so on. Sounds like a good layer of protection in the event security troubles come your way. Well, it’s certainly not a bad idea to get cyber risk insurance, particularly when:

1) you’ve done everything you can do to cover the essentials of information security and still want an extra layer of protection.
2) you or management are still ignoring what can/should be done with processes and technology and, instead, are just taking the easy way out

The choice is yours….and the options are not all that bad. You have to educate yourself though. Be it “cloud” computing or cyber risk insurance, know what you’re getting into so you can determine whether it’s a good fit now, late or never.

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