Many businesses have moved online, and digital technologies have become their lifeline. A cyber attack or network disruption can slow or sever the connectivity and thus interrupt essential business processes. Fortunately, companies can get insured against such cybersecurity threats. 

What is Business Interruption?

When there’s a system failure, and a company has to face a direct loss of income, it’s called business interruption (BI). 

The failure could be due to many reasons such as criminal hacking, malicious inside elements, and distributed denial of service (DDoS) attacks.

Typically, an insurer will cover the insured’s profit that the latter would have earned if there had been no service interruption. Business interruption losses usually include the costs to run the business, such as the payroll expenses and utility bills, along with the costs to reduce the effect of the loss. 

For smaller organizations, business interruptions can be devastating. If they have to shut down their business without insurance, they may never be able to reopen. This makes cyber insurance even more important for small to medium businesses.

How Does Cyber Insurance Work for Business Interruption?

In the olden days, property insurance policies covered business interruption in some cases. Insurers considered physical damage to tangible assets as a loss. Such losses could be due to fire, earthquake, and other things. 

Some insurers have brought forward business interruption coverage as part of cyber insurance or as stand-alone business interruption insurance policies. There doesn’t have to be a complete shutdown to trigger the coverage. Instead, a system slowdown due to network issues or malicious elements can also be classified as a trigger.

Some cyber insurance policies that cover business interruption include a time deductible of 72 hours, or a waiting period before coverage begins. A 72-hour time deductible may be feasible for natural calamities such as hurricanes, but for a cyber event, a 3-day time deductible can be too long.

In the case of business interruption, time is of great importance. Income loss can continue to grow until the system is back to normal, and the same level of service is restored as it was before the incident. Most cyber insurance policies have a waiting period between 6 and 24 hours before recovery can begin.

Reasons to Use Cyber Insurance for Business Interruption

A loss of access or even a slowed down network can lead to lost revenue. Any kind of disruption in work, even if it’s for a short duration, can be costly. Here are a few examples: 

• In 2016, Delta Airlines faced a major network outage that lasted for five hours, and it cost the company $150 million.
• In October 2016, there was a DDoS attack on Dyn, a company that administers a major element of the web, that tok down widely used websites such as PayPal, Twitter, Netflix, Amazon, and others.
• In 2017, Maersk, a Danish shipping company, faced a cyber attack that disrupted operations for two weeks, resulting in a loss of about $300 million. 

Cyber insurance can come to the rescue in such cases. It helps in protecting your business from many cyber events, such as:

• Data breaches: A data breach can lead to the exposure of sensitive business data.
• Damage to third parties: For example, an infected email from your server can create issues in your clients’ systems.
• Data loss: Any data stolen by hackers will be termed as data loss. Data loss generally does not cover the destruction or loss of physical devices.
• Cyber extortion: For example, ransomware on your system might prevent you from accessing important documents and other files.

Benefits of Cyber Insurance for Business Interruption

If your business is unable to perform regular business processes, a cyber insurance policy can be helpful. This coverage comes with many benefits, such as:

• Data breach coverage: If there has been a breach, there will be some costs related to security fixes. A cyber insurance policy can include coverage for such expenses.
• Business interruption cost reimbursement: A cyber disruption can lead to IT failure. This can cost an organization not just money but also time. With a cyber insurance policy, these costs can be recovered.
• Cyber extortion defense: Malicious software, like ransomware, locks up important corporate data and asks for money to regain access. Cyber insurance will keep you secure from such losses.
• Forensic support: After a cyber attack, your company will have to investigate the cause and extent of the breach. With the right cyber insurance policy, you can get coverage for the forensic costs of an investigation. 
• Legal support: When there is a cyber attack, organizations generally seek legal help. Legal support can be costly, but the right cyber insurance policy can help cover these costs.

What is Contingent Business Interruption Coverage?

Another important concept in cyber insurance is Contingent Business Interruption (CBI) loss coverage. This insurance covers the losses that are incurred when the insured loses income because of interruption in the service of a shared resource. This shared resource could be a cloud space or a processing utility. To protect your business against such losses, make sure you check your vendors’ details and confirm that they have adequate coverage. You must also ensure that you have indemnification in your contract with them.

Best Practices for Filing a Business Interruption Claim

Your organization’s workflow can be interrupted due to many reasons. It could be your system that’s down due to a network failure. It could also be a loss to your vendor’s system that indirectly impacts you. In any kind of loss, you’ll have to file a claim with your insurer. 

Here are some best practices to follow before and while making a claim:

• Immediately notify your insurer: As soon as you detect or are notified of the breach, notify your insurer. 
• Review your policy: Before you file a claim, read the policy in detail to understand the deductibles and limitations.
• Check the vendor’s details: Find out if your vendor has adequate coverage for business interruption claims and if it’s in your favor.
• Maintain accurate records: Keep detailed and thorough records, which helps in supporting your claim.
  

Calculating losses is a complex, often difficult, and yet important issue in cyber insurance. Depending on the type of loss and scope of your policy, the insurer may assign their specialists to audit the claim.

When it’s time to purchase cyber business interruption coverage, you should openly discuss your concerns and requirements with your insurer. It’s a complex issue, because there is no uniform approach to cover business interruption scenarios. Always read the policy in detail to understand what it covers and what your responsibilities are in filing a claim.