Ransomware: Cyber-insurance payouts are adding to the problem, warn security experts

"It seems like a fix but it really isn't". Paying the ransom might be the cheapest short-term option to get your data back, but it causes long-term problems.
Written by Danny Palmer, Senior Writer

Cyber-insurance companies that encourage ransomware victims to give into the demands of hackers and pay for decryption keys are making the problem of file-locking malware attacks much worse in the long run, cybersecurity experts have warned.

This year has seen a rise in the number of ransomware attacks, with cities and local governments – in the US in particular – regularly falling victim to ransomware attacks.

SEE: 10 tips for new cybersecurity pros (free PDF)

In a number of cases, the victims have given in to the extortion demands of the attackers, often paying cyber criminals hundreds of thousands of dollars for systems to be restored.

This sometimes happens because restoring the system from backups – if the organisation has backups – takes time, resources and money, and organisations want to be up and running as soon as possible.

However, there are a number of incidents, according to experts, where cyber-insurance companies are encouraging victims to give into the demands of cyber criminals because they see it as the cheapest means of reversing ransomware attacks, while ensuring the least downtime possible.

That's despite repeated warnings from law enforcement agencies that ransoms shouldn't be paid because they fund criminal activity.

"I'm increasingly frustrated at the trend where the insurance companies are actually encouraging victims to pay," said Theresa Payton, former White House CIO for the George W. Bush administration and founder and CEO of cybersecurity company Fortalice Solutions.

Speaking at the CloudSec 2019 conference in London, she recalled how one victim of a ransomware attack she was advising explained how they were being encouraged to pay the ransom by their insurance provider – even though their preferred option was to restore from backups.

"They called the insurance company to try to do the forensics to not pay [but] the insurance company said they're experienced at negotiating with ransomware syndicates, getting the price down and it's going to be a lot cheaper to pay," said Payton.

For the insurance companies, she argued, the key goal is to get the problem fixed at the lowest price – and that means paying the ransom.

"The insurance company looks at what the potential incident response and forensic bill might be and that's going to be bigger in many cases as organisations aren't prepared, so they'd actually rather pay. It's very frustrating," she said.

This is leading to additional problems because criminals are learning that organisations that have cyber insurance could be easier to extort a payment from – and if they've compromised the network, they can snoop on corporate files to find out if the company is insured and use that to help influence their attack.

SEE: A winning strategy for cybersecurity (ZDNet special report) | Download the report as a PDF (TechRepublic)

"These are attackers who get on a network and sit there for months, really profiling the target. What they've started to do is look at your [recovery] playbook because they're on your network and will have read it – so they know what they're going to do," said Bob McArdle, director of forward-looking threat research at Trend Micro.

"If they know you've got cyber insurance, they'll see that you'll pay and it's guaranteed they'll hit that," he added.

One way attackers can take advantage of knowing about a cyber-insurance policy is by ensuring their ransom demand is less than the costs of recovering the network from backups or, with the aid of cybersecurity companies, making their offer slightly more palatable.

Recovering the network at the lowest cost possible is potentially appealing for all ransomware victims, but especially those in the public sector funded by taxes. However, while some might argue that taxpayers want things to cost as little as possible, Payton argued that organisations should be honest about why extra funding is being spent – so as not to pay malicious hackers.

"Don't pay, be transparent and tell the taxpaying citizens why you're not going to pay – because you don't want to fund criminals – and trust the playbook you've already practiced," said Payton.

Ultimately, while some might suggest that paying the ransom is the best option for getting back up and running in the short-term, it also brings a lot of problems with it.

Those behind ransomware are criminals and can't be trusted, so even if a payment is made, the decryption key might not work – if received at all – leaving the victim out of pocket for a ransom payment that didn't work, plus the follow-up recovery costs.

In general, choosing to pay the ransom rather than properly securing the network is also a huge problem, because there's no guarantee that attackers won't come back to hit what they see as a weak target further down the line.

SEE: No More Ransom project has prevented ransomware profits of at least $108 million

On top of this, giving in and paying a ransom after a ransomware attack is funding criminal activity, not only rewarding malicious hackers for their behaviour, but also potentially emboldening them to conduct further attacks against other targets.

"Paying might seem like it helps that person's problem, but they target sectors at a time, so they're going to leverage what they've learned from that to hit people you probably know – maybe in the next county over – then the next one and the next one. So it just self-perpetuates, it seems like a fix but it really isn't," said McArdle.

Despite the rise in ransomware, falling victim to an attack isn't inevitable and ensuring that unsecured systems aren't left facing the open internet, and that operating systems and software are patched and up to date, can go a long way to preventing incidents.

And despite the way in which some insurers could encourage victims to pay a ransom in the event of an attack, regularly backing up systems means that the network can be restored without giving into the demands of criminals.


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