Multi-factor authentication (MFA) cyber insurance requirement

Multifactor authentication is the inclusion of additional security measures to log into an account, which can range from a third-party authentication application (like Google Authenticator or Microsoft Authenticator), supplying a phone number or secondary email, facial recognition, or answering a push notification to a personal device.

MFA in cybersecurity makes it significantly more difficult for cybercriminals to break into digital systems via remote access by adding additional layers of verification. It also protects against social engineering tactics used by cybercriminals to trick employees into unintentionally revealing login credentials or granting unauthorized access.

Multi-factor authentication is easy to implement but difficult to bypass, which makes it a highly effective security measure for businesses of all sizes. For example, a company may require users to enter both a password and a unique code they receive from a text message sent to a mobile device to gain access to systems and data.

The process is simple and fast, but cybercriminals will have a very difficult time getting around it without having access to a user’s mobile device.

MFA is effective because it requires users to enter information from two or more different categories, which may be very difficult—or impossible—for cybercriminals to access.

Four common categories used with MFA include:

• Knowledge: Something you know, like a password or PIN
• Possession: Something you have, like a badge, security token, or smartphone
• Inherence: Something you are, like fingerprints, voice recognition, or another biometric
• Location: Somewhere you are, like a zero-trust cybersecurity environment

Choosing the right MFA methods may depend on whether employees work in-person, remotely, or in a hybrid environment.

Employees who work on-premises can take advantage of physical security tokens or badges to quickly access dedicated in-office equipment, while authentications with smartphones and security codes via text messages are more convenient for remote employees. Hybrid employees require MFA methods they can easily use, regardless of where they're working.

The right MFA methods also depend on which systems or areas are most vulnerable in a company’s workplace. For example, highly sensitive client records may require stronger MFA methods, such as biometric verification or security tokens. Simpler MFA methods, like security codes sent to mobile devices, may be sufficient for systems that contain less sensitive information.

Implementing MFA cybersecurity protections prevents cybercriminals from stealing critical information, which may result in a costly and time-consuming recovery.

In the event of a cyberattack, a business could face significant expenses, which may include:

• Data recovery and system restoration
• Legal fees and regulatory fines
• Data breach notification requirements
• Business interruption and revenue loss
• Ransom payments
• Reputation damage control
• Enhanced security measures

By requiring multiple forms of verification, MFA greatly reduces the risk of unauthorized access, even if a hacker steals or guesses a password. A secondary factor, such as a physical security token, would be extremely difficult for an attacker to bypass without having the difficult-to-obtain token.

With the frequency of data breaches and cyber threats increasing, many clients now seek business partners that prioritize cybersecurity. By using MFA, companies can gain the trust of potential clients by ensuring their information is protected by multiple layers of verification. Compliance with regulatory and industry standards for data security also helps to position a company as a business partner that can be trusted.

If a small business needs to obtain cyber insurance coverage, an insurer could have certain cyber insurance requirements, which may vary depending on the size of the business, the industry, and other factors.

Each carrier will have its own application for cyber coverage and a set of underwriting questions. The client’s responses determine the available coverage and the MFA requirements for cyber insurance.

For example, some carriers require businesses to use MFA to be eligible for cyber liability coverage, and others don't. However, while others may not have MFA requirements, they may restrict some cyber coverage, such as invoice manipulation, if an MFA solution isn't used with email.

MFA is essential for cyber insurance providers to mitigate risk and reduce the likelihood of claims. Reducing costs can result in lower premiums for all policyholders, which benefits everyone.

Multi-factor authentication also benefits cybersecurity insurance carriers by increasing underwriting accuracy and ensuring compliance with industry regulatory standards, which also helps to keep costs in check.

Businesses of all sizes experience cybercrime, like phishing, ransomware attacks, and other cyber threats – and nearly half are against small businesses.

Cyber insurance is essential for any business that relies on digital systems, stores sensitive data, or conducts online transactions, regardless of its size or industry. There are two types of cyber insurance to consider: first-party and third-party.

First-party cyber insurance provides coverage for cyberattacks against your company. Third-party cyber insurance provides coverage for your clients in the event of a cyberattack. Many companies have both types of coverage to make sure they and their clients are fully protected.

Some industries where cyber insurance is a must include:

• IT (especially cyber security companies)
• Retail stores
• Healthcare
• Financial service providers
• Real estate businesses

Cyberattacks are becoming increasingly more sophisticated, and small business owners who assume they're not at risk are often the most vulnerable. Cybercriminals frequently attack small businesses because they often lack adequate cybersecurity resources, which makes them easier targets.

Whether a business is a small one-person operation or a large corporation, cyber insurance provides crucial protection that shouldn't be ignored.

If you need any help choosing the right cyber coverage or any other types of coverage, you can consult with an insurance agent about all your business insurance needs. We can help you find the right cyber coverage at the best insurance cost.

To get started, fill out Insureon’s easy online application to compare insurance quotes from top-rated U.S. insurance companies. Once you find the right coverage for your small business, you can begin coverage and get your certificate of insurance (COI) in less than 24 hours.