Cyber Insurance for IFAs and Why Should I Buy?

Cyber insurance is now seen as an important part of a firm’s cyber defences and can meet the significant costs of a cyber hack. Here we explain what cyber insurance is, what it can cover, and why buying cyber insurance can be a good investment.

For the businesses who fall victim to cyber criminals the impact of an attack can be devastating to both their balance sheet and reputation. Independent Financial Advisers (IFAs) are no less vulnerable to cyber criminals than any other business operating digitally and online, and given the sensitive and confidential information IFAs hold a successful theft of data could prove hugely damaging. It’s why it is important for IFAs to consider cyber insurance as a key part of their cyber defences.

What is Cyber Insurance?

Most IFAs would consider it essential to insure against the possibility of their offices flooding or being sued by a client for negligence but not all see cyber insurance as necessary, despite the growing likelihood that they will be the victim of a successful and costly cyber-attack. Cyber insurance provides financial protection and access to professional IT, legal and public relations support that can allow a business to quickly return to normal after a cyber attack with minimal recovery costs to their business and less inconvenience to their clients. A cyber policy will pay for damages you might have to pay to affected third parties where privacy law has been breached and their personal data has been lost, stolen or incorrectly made available.

Why do I Need Cyber Insurance?

Incidents of cybercrime have accelerated in recent years. It’s estimated that the cost of cybercrime will rise from US$9.22 trillion in 2024 to US$13.82 trillion in 2028. According to government figures, nearly a third (32 percent) of businesses reported experiencing a cyber security breach or attack over the previous 12 months. Your business is vulnerable if you operate online and hold confidential and sensitive client information, making cyber insurance an important consideration.

What Methods do Cyber Criminals Use?

While cybercrime can come in many forms, some of the most common forms include ransomware, theft of confidential data and identity fraud. Ransomware is a type of malware that once downloaded within an organisation’s computer systems can lock users out and effectively stop the business from operating. Criminals then send a ransom demand for payment in exchange for the encryption key the firm will need to access its own systems. Increasingly, however, criminals are using ransomware not just to disrupt an organisation’s operations but to also steal confidential and sensitive information that they can then sell on the dark web.

Typically, cyber criminals use some form of social engineering such as phishing, for example, which involves sending scam emails or text messages while posing as a reputable person to trick business owners and employees to give away sensitive information or click on a link that allows malware to be downloaded into an organisation’s computer systems.

After such an incident businesses are then vulnerable to costs not just from dealing with the actual attack itself but other expenses such as business interruption and any loss of revenue related to a loss of reputation. A cyber readiness survey by the insurer Hiscox reveals that of the organisations who have been the victim of a cyber attack over the last 12 months nearly half (47 percent) say they have found it hard to attract new customers and 43 percent say they have lost customers.

Assess Your Vulnerabilities

When considering whether to choose cyber insurance carrying out a cyber risk assessment can be an effective way of deciding how exposed your business is to a cyber incident. The UK’s National Cyber Security Centre offers useful guidance on how to carry out a basic risk assessment. Other third parties can perform a cyber risk assessment on your behalf which will help strengthen existing security practices, find any vulnerabilities, and establish compliance readiness and data security. Speaking to an insurance broker can help you with your risk assessment as well as reviewing any current cyber insurance you have or providing a quote for cover.

Cyber Insurance Provides a Valuable Safety Net

Ultimately, if you choose to buy cyber insurance it can save you as an IFA from the negative impact of a cyber incident. The financial and professional support available from a policy provides an important safety net that will help to protect both your finances and your reputation, helping to make sure your business quickly recovers and remains viable for the future.

Learn more

To discuss any of the issues raised in this article, contact us on 0330 173 8520 or email us at professions@aon.co.uk

Whilst care has been taken in the production of this article and the information contained within it has been obtained from sources that Aon UK Limited believes to be reliable, Aon UK Limited does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the article or any part of it and can accept no liability for any loss incurred in any way whatsoever by any person who may rely on it. In any case any recipient shall be entirely responsible for the use to which it puts this article. This article has been compiled using information available to us up to 04/12/2024.

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