Hacking, ransomware and security breaches are things no company wants to think about—much less experience. Despite improved security measures, however, they remain very real threats. That’s why cyber liability insurance may be an option every entrepreneur should consider for their business.
Cyberattacks are still happening—and they’re costing trillions.
Let’s take a look at some numbers. According to the 2020 Data Breach Investigations Report (DBIR) published by Verizon:
- 28% of breaches involved small business victims
- 30% involved internal actors (employees)
- The motivation behind 83% of breaches centered on financial gains
- Over half of data comprised was related to credentials, and 78% of attacks on web applications involved using stolen credentials
- 45% of data breaches were caused by hacking, 22% included social attacks, and 17% involved malware
- Ransomware now accounts for 27% of malware incidents
- Credential theft, errors and social attacks are the 3 most common culprits in breaches
Breaches in security motivated by financial gain aren’t just about accessing a bank account and draining it. Information—and the price they can get for it—is far more valuable to hackers. It’s also far more costly to businesses in terms of cyber liability. Should information companies store, such as credit card or social security numbers, be leaked as part of a cyberattack, the price tag can be astronomical.
Citing the ForgeRock Consumer Identity Breach Report for 20202, a recent TechRepublic article noted that, “With more than 5 billion records compromised in 2019, breaches cost US organizations more than $1.2 trillion. Combined with the $654 billion in costs in 2018, data breaches have hit organizations to the tune of $1.8 trillion over the past two years.”
To reduce the risk of a data breach, having strong security protocols in place is a must for every business. And cyber liability insurance runs a close second.
What does cyber liability insurance cover?
Just like every property insurance policy is different, cyber liability insurance policies widely vary as well. The most common policies cover things like:
- Costs associated with notifying customers (or employees) about the data breach.
- Any cost you pay for credit monitoring services for the victims of the breach.
- Paying a public relations firm to protect your company’s reputation.
- Lost income due to being unable to operate your business immediately after the breach.
- Legal fees
- Payment of state or federal fines charged for not meeting compliance requirements as it concerns protecting consumer data
Some policies even cover “extortion costs”; in other words, paying a ransom amount to have your system released from online criminals who lock it down. Cyber liability insurance can include both first party claims (claims you as a business make for losses) and third-party claims (claims that your employees or customers make against you relating to compromised data.)
What does cyber liability insurance not cover?
Although cyber liability insurance can work to make you and your business whole after a data breach incident, these policies don’t cover everything. For example, they usually don’t cover potential future lost profits or loss of value resulting from the online theft of intellectual property. As a general rule, they also don’t cover costs relating to improving or upgrading your system.
What else should I know about cyber liability insurance?
First, if you haven’t talked to a commercial insurance agent about cyber liability insurance yet, make an appointment with your agent. It’s time for a conversation.
Second, when you do meet with your agent, ask a lot of questions about coverages. For example, does the cyber liability insurance policy you’re considering cover errors and omissions—essentially mistakes caused by your or your employees while you are using or accessing your technology? How long from the initial breach does the insurance policy pay damages? Make sure you understand what is an isn’t covered, or any limitations on coverage. Having the right information will help you make the best decision for your business.