Definition of Cyber Extortion in Business Insurance

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Cyber Extortion

The influx of cybercriminals within the business world continues to grow. No matter how much companies invest in security, it seems that hackers and other black hats can sneak through systems to obtain personally identifiable information (PII). As a result, these companies lose income and productivity.

Cyber Extortion

One form of cybercrime is known as cyber extortion. Here, the criminals threaten malicious activity against a company’s data if they aren’t paid a desired sum by the deadline. For instance, they might ask for a form of cryptocurrency within a certain period of time. If not, they’ll then execute a distributed denial-of-service (DDoS) attack on the company’s infrastructure.

Cyber extortion is similar to a ransomware attack. That form of cybercrime starts with malicious activity. Once the company is down, the hackers demand a ransom to restore service.

How It Happens

There are several ways cyber extortion occurs within a company. The most common is when an unsuspecting employee clicks an innocuous link in an email. The result is ransomware or other forms of virus breaking into the network and shutting everything down. This includes system logins and access to required data.

Another way is to infect several computers on the network. If this is successful, the cybercriminal can flood the communication channels with a rapid stream of messages that slows down production. Simultaneously, they might also break into sensitive systems to attack or steal PII and financial data.

Coverage for Cyber Extortion

In environments where data is how a company operates, some type of insurance is required to help recoup lost income and pay for necessary repairs. General liability insurance doesn’t cover this. The solution is cyber liability insurance.

Should a business become a victim of cyber extortion, they can utilize this form of protection to cover several items. For example, in a worst-case scenario, it provides financial support to meet the demands of a ransomware attack. When the smoke clears, cyber liability insurance helps a business pay for consultants who can help prevent another such attack.

The most important thing this insurance does is help get a business back on its feet. It does this by allowing the owner or management to hire professionals who can return hardware and software to their previous working conditions.

Who Needs Cyber Liability Insurance?

As mentioned above, cyber liability insurance is a must for businesses that rely on data to build a client base or maintain profits. Thus, it’s needed for IT consulting firms as well as businesses that sell solely on the internet. In other words, e-commerce organizations.

It’s also needed for companies that rely exclusively on a customer relationship management (CRM) or enterprise resource planning (ERP) system. These applications normally store multiple data points concerning consumers. Salespeople, human resource representatives, and inventory specialists are all affected when they aren’t able to access their CRM or ERP components.

Avoid Cyber Extortion

The purchase of a cyber liability insurance plan doesn’t mean a company can continue normally after a cyber extortion attack. The fact that these criminals know they have vulnerabilities increases the chance they’ll try to get in again. Thus, a company needs to minimize the chances of a future attack.

Here are some ways this can be done:

  • Create a risk management plan that details the vulnerabilities and creates solutions to mitigate future cyber extortion.

  • Design a disaster recovery plan (DRP) that describes the steps required to maintain a continuity of business if another attack occurs. The DRP would contain information on backup devices and how to move operations to them while dealing with cyber extortion.

  • Regularly train employees on cybercriminals and the ways they can access systems

  • Upgrade and maintain computers, smart devices, and network equipment so they are compliant with the latest virus rules.

Through these steps, a company does two things. First, it reduces the risk of another cyber extortion attempt. Second, when it comes to cyber liability insurance, it shows the insurer that the company is making strides to prevent another claim. Thus, the firm might decide to lower its premiums.