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Following a significant rise in cyberattacks, businesses are rushing to insurance firms to protect themselves against the financial consequences of a breach or ransomware attack. In response to these rising demands, cyber insurance companies are starting to require network penetration testing as a condition of coverage.
This is a significant development, as it underscores the importance of proactive security measures in mitigating the risks posed by cyberattacks. By requiring penetration testing, insurance companies are essentially saying that they will not cover the costs of an attack unless the organization can demonstrate that it has taken steps to identify and address vulnerabilities in its network.
See more about preventing a cyberattack in your organization
What is network penetration testing?
Network penetration testing is a security assessment that is used to identify weaknesses in an organization's network infrastructure. The goal of penetration testing is to simulate a real-world attack on the network to identify vulnerabilities that an attacker could exploit. Once the assessment is complete, the organization is presented with a comprehensive penetration testing report detailing any flaws or vulnerabilities for the network engineers and IT professionals to fix.
While such testing may appear costly – with the global spending on security and risk management touching US$ 150 billion in 2021 – compared to the US$ 6 trillion lost to breaches in the same year, the expenditure is worthwhile.
Why do I need cyber insurance?
With the proliferation of ransomware and other cyber threats, businesses are increasingly at risk of suffering a costly attack. Cyber insurance provides financial protection in the event that an organization is hit by a cyberattack. In the event of a successful attack, cyber insurance can help to cover the costs of data recovery, business interruption, legal expenses, and damage to reputation.
While the decision to purchase cyber insurance is ultimately up to the business, it is essential to note that many companies are now starting to require it as a condition of doing business. For example, many banks now require their business customers to have some form of cyber insurance in place.
See more about why insurance companies avoid covering cybersecurity risks
How does cyber insurance work?
Most cybersecurity insurance policies cover the first party (the organization buying the insurance policy or who gets directly impacted by an attack) and third parties (the users). The first-party coverage usually includes expenses related to data breaches, business interruption, system damage, and cyber extortion. The third-party coverage generally extends to cover liability for things like privacy violations, defamation, and copyright infringement.
The coverage limits will vary depending on the insurance policy, and the requirements to be insured may also vary depending on the provider, industry, and location. These requirements can include having a minimum amount of cyber security measures in place, such as firewalls, intrusion detection systems, and encryption.
In some cases, an insurance company may also require a business to submit to a security audit or review before they will provide coverage. This is done to assess the organization's risk profile and ensure that the company has adequate security measures in place.
learn more about cybersecurity regulations for insurance companies
What does network penetration testing have to do with cyber insurance?
As mentioned previously, many insurance companies are now starting to require network penetration testing as a condition of coverage. This is because penetration testing provides evidence that an organization has taken proactive steps to identify and address vulnerabilities in its network. By requiring penetration testing, insurance companies are essentially saying that they will not cover the costs of an attack unless the organization can demonstrate that it has taken steps to mitigate the risks posed by cyberattacks.
There are a few key things businesses can do to get better coverage at more reasonable rates.
First, having an accurate and up-to-date inventory of all your assets, including hardware, software, and data, is essential. This will help you determine your assets' true value and how much it would cost to replace them in the event of a loss.
Second, you should regularly review your security measures and update them as needed. This includes installing the latest security patches, using strong passwords and encrypting sensitive data.
Third, you should consider conducting regular penetration tests to identify any weaknesses in your network. Taking these proactive steps can show insurers that you are serious about protecting your business from cyberattacks.
Finally, shopping around and comparing rates from different insurers is essential. Not all insurers are created equal, and some may offer better coverage at more reasonable rates than others.
Cyber insurance can be a valuable tool for businesses of all sizes. It can help to cover the costs of data breaches, business interruption, and other damages caused by cyberattacks. It is beneficial to proactively take the necessary steps to strengthen your security posture before it is time for a renewal or if you are planning on signing up for a new policy in the near future.
Packetlabs is a SOC2 Type II Accredited organization that can provide a comprehensive penetration test to help you meet your cyber insurance provider's requirements. Get a quote today by filling out the form below, and one of our team members will get back to you shortly.