Cyber liability insurance protects from cybercrimes like ransomware and internal attacks that have risen exponentially in the last five years. Although businesses have to budget hundreds or thousands of dollars extra for this insurance, that cost can look small compared to recovering from a data breach.
Coverage varies widely between insurance companies for protecting against this rising risk. Your cyber liability insurance may include:
Monitoring services. Offers proactive services to help you prevent cybercrimes or nip data breaches at the beginning.
Data breach notification. Pays expenses related to notifying customers about the possible breach of their sensitive information.
Liability. Covers costs from defending and settling claims in court for individual customers, corporate clients and partnerships.
Media liability. Protects against claims for the breach of intellectual property, copyright or trademark infringement.
Identity recovery. Covers expenses for restoring personal identities and credit.
Data recovery. Pays for professional services and physical resources to take back control of business data.
Damaged computer systems. Repairs damage to breached systems or cleans up malicious viruses and malware.
Ransom. Includes the cost of negotiating with attackers or paying a ransom.
Business interruption. Covers lost business revenue while dealing with the cyber attack.
Public relations. Allows businesses to restore public reputation using professional advice.
How much does cyber liability insurance cost?
Cyber liability insurance could cost your business anywhere from a few hundred to several thousand dollars. A business’s premium stems from its risk of a cybersecurity breach and the expected costs for restoring sensitive information.
Factors that influence your premium:
The amount of liability insured. Expect to pay more when you choose higher limits for protecting against cybercrime.
Your industry’s risk. Your insurance company will charge higher premiums for industries known as targets and for companies who store large amounts of personal information. Industries can include healthcare and financial services.
Likelihood of a claim. Having a history with one or more data breaches raises your liability risk and your insurance premium.
Security measures in place. Many insurance companies nod toward your business’s extra cybersecurity actions, like annual risk assessments, employee training or strong password security.
Your company’s size and personnel access. Larger companies and those that allow many employees to access sensitive information involve higher risks, especially with employee errors or insider attacks.
How much does it cost to recover from a cybercrime?
Cybercrime has risen nearly 70% in the last five years and cost large organizations $13 million for full recovery in 2018, according to the 2019 Cost of Cybercrime Study conducted by Ponemon Institute.
At the same time, cyber liability court claims could cost $110,000 in legal defense fees and $220,000 in settlements, according to the 2018 NetDiligence Cyber Claims Study. The costs go up from there if HIPAA gets involved for a breach of healthcare data. Many businesses couldn’t handle these steep costs on their own.
Case study: Target’s credit card breach
In 2013, retail giant Target was involved in the biggest retail hack in history when hackers received access to more than 40 million shoppers’ credit card details. The retailer’s case shows the wide impact of a cyber breach:
Target reported that the breach cost over $200 million in recovery, court cases and business and customer settlements.
It spent over $60 million in February 2014 alone responding to the breach.
Target promised shoppers reimbursement for fraudulent charges.
The retailer’s profit dropped 46% directly after the cyber attack.
Who needs cyber liability insurance?
It’s not just major companies like Target, LinkedIn and Yahoo that should show concern over cyber liability. Claims against smaller companies can be just as devastating. In fact, over 40% of cybercrimes target small businesses, according to the 2019 Verizon Data Breach Investigations Report. Every business should consider the risks of cybercrime and the effects it might have on the company’s operations.
What types of cyber threats exist?
Businesses face many types of cybercrimes with each one increasing in number of attacks each year. Threats to watch out for:
Cloud-based server attacks
Denials of service
Social media attacks
How can I save money on cyber liability coverage?
As with any form of insurance, it is critical that business owners take the time to assess what they actually need to be covered for to avoid paying for expensive extras on their policy they don’t require. Some other key steps to reduce the cost of your cover include:
Improve security practices. Many insurance companies lower premiums based on the security measures you take for protection. Those measures can include monitoring services, software, security tests and employee training for cybercrime prevention.
Get regular risk assessments. You could land discounts for receiving regular assessments from security professionals and taking new security actions for any weaknesses uncovered.
Lower the number of people with access. Insurance companies know that security risks increase when more employees can access sensitive information.
Compare business insurance
While cyber liability insurance can set your business back a few thousand dollars each year, it also protects against the increasing danger that a cybercrime will happen to your company. Even low claims payouts can total hundreds of thousands, offsetting the cost of insurance completely. Further minimize the impact on your bottom line by comparing multiple commercial insurance companies.
Willam Eve is the country manager for Finder's Canada operations. He has previously held the positions of group publisher of insurance for Finder Australia and lead publisher for the Finder global team. William has a Bachelor of Communications from the University of Technology Sydney, Australia. He loves the challenge of launching Finder into new markets while helping grow Finder’s global team.
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