Are you wondering if Cyber Liability Insurance is really necessary? Keep reading.
A friend of mine works for a local industrial supply company that, within the last year, went from a small business to a mid-sized one as a result of an acquisition. She recently told me some company executives had received an email with a link to a document, and three of the group clicked the malicious URL. As a result, a hacker gained access to several areas of their systems, and their one-and-only IT person was being blamed.
Sadly, she isn’t the first person I know who has been through a company breach. While companies of all sizes are targets, the small to midsize ones are experiencing the majority of successful attacks. As high as 55% of companies in this category have experienced a data breach, with 53% having multiple occurrences. Smaller organizations’ elevated attack success rate is often simply due to insufficient budget for adequate cybersecurity tools and resources.
Data breaches are becoming extremely costly to businesses and, in many cases, result in significant fines and legal fees. They not only hurt financially but cause damage to a business’s reputation and put customers and employees at risk. That’s why organizations are rapidly embracing cyber insurance to limit their liability and ease the burden of recovery in the event of cybercrime.
What is cyber insurance?
Regular business insurance does not cover cyber incidents or data breaches – they often exclude them. Cyber insurance policies generally start with business liability related to a data breach involving sensitive customer information and progress to more robust policies with additional coverage to help prepare, respond, and recover from a cyber-attack.
What does cyber insurance cover?
There are multiple layers to how cyber insurance policies are constructed, but four primary risk areas are considered in the process: privacy, security, operational, and service. Policies are generally written based on first-party and third-party coverage:
First-party covers costs related to:
- Extortion demands
- Legal counsel
- Investigative/forensic services
- Data or identity recovery services
- Lost income due to business interruption
- Public relations/crisis management
- Fees, fines, and penalties
Third-party covers costs related to:
- Damages to customers or partners impacted
- Settlement expenses due to lawsuits
- Costs related to litigation in regulatory inquiries
Cyber insurance has no one-size-fits-all policy since company size, industry, revenue, and geographic location are all considerations. As with any insurance, policies, and pricing vary widely from one provider to the next.
Why consider cyber insurance?
Protecting your business with cyber liability insurance will help you respond and recover quicker after an incident. In addition, your business may need coverage if you store or process sensitive data – like digital payments, medical or financial information, or personal data about customers. Ultimately, the question is, “What would happen to your business if you faced a cyber-attack today?”
How does cyber insurance work?
We’ve made it easy and put together a complete guide on what you need to know about cyber insurance and how to qualify. It includes a comprehensive checklist so your organization will be eligible for cyber liability insurance and better prepared in the event of a cyber-attack.