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Cyber liability insurance

When changing passwords won't protect you, cyber insurance will.

If your small business relies on digital technology to make sales, communicate or store information then you are exposed to what’s known as ‘cyber liability’ or ‘cyber risk’.

As foreign as it sounds, it’s a real issue in 2019. According to the latest cyber threat report published by NCSC, 35% of the cyber security incidents reported to CERT were made by New Zealand organisations. In 2018 alone, business organisations in New Zealand lost almost NZD$800,000 due to ‘successful’ fraudulent invoice emails and 40% companies think they will face some form of cyber crime in next 24 months.

This cost comes from range of events from getting your website hacked, to being sued for something you published online.

This is why New Zealand businesses are turning to cyber insurance.

Cyber liability insurance keeps your business safe from the risks of the modern world.

This relatively new type of cover has been developed to protect businesses against costs that may arise as a result of their computer systems being hacked. If private and confidential information about clients is accessed, stolen or destroyed by hackers, businesses now have a form of protection in place to ensure their future financial security.

Does my business need cyber insurance?

Let’s consider the risks of doing modern business in 2021. Our reliance on the digital world has made it easier than ever to fall prey to people looking to profit from your misfortune.

Some real risks to consider include:

  • Data breaches e.g. your customers information.
  • Fraud and theft e.g. getting your online store hacked.
  • Business interruptions e.g your website getting taken down.

Cyber insurance really shines when it comes to these types of claims. Traditional business insurance may fail to cover these claims or take longer to process.

Cyber risk by the numbers

  1. Cybercrime cost New Zealand SME’s an average of $15,592 in 2018.
  2. More than half of SME’s in New Zealand experience some sort of cyber breach each year.
  3. 70% are affected by malware, scams and viruses.

What does cyber insurance generally cover?

Before we get into the details of what’s covered let’s take a look at a few examples of cyber crime and the type of insurance that comes into play.

Cyber breach exampleEvent that’s covered by cyber insurance
  • A business is targeted by a real looking email pretending to be a bank, informing the recipient of changed bank details.
  • Social engineering fraud loss
  • An online business gets their data hacked, losing customer information and receiving criticism from the public.
  • Third party liability (e.g. if customer sues)
  • Event recovery costs
  • A cyber attack of a businesses website and network.
  • Business interruption

What’s covered?

Cyber liability insurance policies typically offer coverage for a range of first-party (things that affect you) and third-party losses (things that affect other people.

What are some benefits of getting cyber insurance?

These days, the business world and the digital world are closely linked. While this has made it much easier to do business in New Zealand and around the world, it also means that businesses of all sizes face a new and varied range of cyber risks. Cyber hacking is a real threat faced by everyone from sole traders, to large corporations, which is why cyber liability insurance can offer a range of benefits, including:

  • A wide range of cover. From the personal and payment details of customers to information about the inner workings of your business, cyber hackers target an extensive range of information. If you’re the victim of a hacking attack, cyber liability insurance can provide business interruption cover, cover damages claims when you lose third party data, and even cover the cost of hiring a public relations firm to help you manage any negative publicity.
  • Affordable protection. Some business owners are put off the idea of purchasing cyber liability cover because they fear it will be too expensive. However, cover is actually much more affordable than you may realise.
  • Risk management. Your cyber liability insurer can not only help you in the event of a hacking attack, but can also help you prevent such attacks occurring. Your insurer will help you work out a risk management strategy and ensure you have adequate protection in place for your digital systems.
  • Cover not provided by public liability insurance. Most public liability business insurance policies will exclude losses connected with the internet from your cover, which is yet another reason why dedicated cyber liability cover is a wise investment.

Cyber crime in 2021

In today’s increasingly complex technological world, businesses are faced with more risks than ever before. Cyber crime is on the rise in New Zealand, and around the world, and the potential loss that businesses can incur as a result is huge.

The main causes of cyber risks in New Zealand include:

  • Ransomware
  • Phishing or whaling scams
  • Data or security breaches
  • Viruses and malware
  • User error
  • Downtime and invoicing

A rising number of data breaches for businesses

Data security is a serious concern for many of New Zealand’s largest businesses. Data breaches involving large companies, especially those with a high online presence, seem to be regularly reported in the papers these days. While even small businesses express concern about the dangerous potential for cyber attacks.

Many companies have started seeking out cyber liability insurance to protect their business.

This type of cover offers a high level of protection and equips businesses with the tools they need to survive financially.

How much can cyber theft cost a business?

Generally speaking, the more data that is compromised, the greater the cost will be. If your company falls victim to a large breach of data, the number of associated expenses incurred may surprise you. Some of the key costs include:

  • Detecting a breach and notifying the affected parties. Sophisticated breaches may take months to notice, which can allow damage—and expenses—to accumulate until the problem is discovered.
  • Mitigating and repairing the damage. This may require the assistance of a computer expert.
  • Losing business and clients. Lost business has been shown to make of the biggest percentage of losses resulting from data breaches. When a business loses its reputation and is no longer seen as trustworthy or secure by its customers, the impact can be huge.
  • Fines and penalties. This can be imposed from a number of sources if you don’t protect sensitive data. You may have to pay damages to settle claims against your business.
  • Inability to perform business as usual. A data breach can also cause a significant disruption to the everyday running of your business, pulling IT and key management staff away from their regular duties and resulting in a loss of productivity.
  • Cost of introducing tighter safety measures. Add in the possible cost of introducing enhanced security and monitoring protocols and you’re looking at a significantly costly exercise for your business.

How much will cyber liability insurance cost me?

A business with $1 million in annual turnover and insured for cyber liability of $500,000 can expect to pay an annual premium of $2,000. But there are several important factors that have a bearing on the cost of your cyber liability cover, including:

  • The sum insured. The higher the sum insured you select, the more your premiums will be.
  • The range of cover you select. If you decide to add additional options to your policy to make it more suitable for your business, you will need to pay more for cover.
  • The risks you face. The insurer will assess the unique risks your business faces when determining the cost of cover – for example, a business that collects online payment information from customers may a have a higher level of risk than another business that does not.
  • The protection measures you have in place. The insurer will assess what protective measures your business has in place to safeguard against cyber attacks.
  • The nature of your business. The industry in which you work and the digital systems you manage will affect your level of risk.
  • The number of employees you have. The more employees you have, the larger the amount of personal information your business will store, which may make it a more attractive target for hackers.

What types of industries might consider taking out cyber insurance?

Businesses in a number of industries might consider taking out cyber insurance. In particular, businesses in financial and healthcare industries rely significantly on reputations to ensure their success, so a damaged reputation can have a massively detrimental impact.

Industries where cyber liability cover must be considered include:

  • Healthcare/medical
  • Financial Services
  • Retail/wholesale
  • Manufacturing
  • Real estate
  • Construction
  • Telecommunications or Internet services
  • Travel sector
  • Education
  • Law firms
  • Insurance brokers
  • Telemarketing

Does cyber liability insurance cover data breaches?

Cyber liability insurance provides cover in the event that your business is a victim of a data breach. It covers the financial consequences of lost or stolen employee or customer data, including damages claims and loss of profit, while it also covers the cost of restoring or recollecting data following a breach.

In addition, cyber liability insurance covers your expenses if you are the subject of a data protection regulator’s investigation, and also covers the cost of hiring a PR firm to repair your business’ image following a data breach.

How do data breaches even affect my business?

In the modern world, it’s essential for business to hold and sensitive information online. From cloud-based data storage to online credit card payments, customer address details and employee tax file numbers, modern businesses store and send a wide range of important information across digital channels.

This of course makes businesses an attractive target for cyber criminals keen to get their hands on sensitive personal and financial details.

Tips to compare cyber insurance

When comparing cyber liability insurance policies, make sure to take the following factors into consideration:

  • Identify the risks your business faces. The biggest risk for one business might be completely different to the biggest risk for the next. Would the exposure of your customers’ personal information pose the biggest threat to you, or would it be the interruption to your ability to continue providing a service? Make sure you know the problems your business could face.
  • What sort of cover do you already have? Some of the insurance you already have in place may provide some coverage for cyber risks. Speak to an insurance expert to understand how your business is placed.
  • Get the right level of cover. Cyber liability is not a ‘one size fits all’ type of cover. Concentrate on making sure your policy includes all the basic features, but assess whether some of the tailored options will be necessary. Also, determine if the amount you’re insured for will be enough to cover the costs you’ll incur in the event of a data breach. It’s a good idea to involve all stakeholders from different branches within the company to accurately assess how much cover you’ll need.
  • Know what’s excluded. Knowing what is and isn’t covered on any insurance policy is always essential. Check your insurer’s list of exclusions to prevent any nasty surprises at some stage in the future.
  • What about third-party negligence? If, like many business, you outsource tasks like data processing or storage to a third party, check whether negligence from that third-party will be covered by your insurance provider.

Still unsure why Cyber insurance is essential for your business?

A presence in the online world exposes your business to significantly more threats than bricks-and-mortar stores would encounter. If you’ve got an online shopfront, your site is constantly available all over the world and can be accessed from an ever-increasing number of technological devices. It’s quite easy to see that the potential exposure to malicious activities is greatly increased.

In addition, the online world poses an increased risk to smaller business because they must rely on third-party vendors. While larger companies can manage all of their IT needs in house, smaller companies rely on third parties for things like data storage, so cyber liability cover can help cover the expenses incurred by any negligence on behalf of those third parties.

Finally, cyber liability insurance cover can be tailored to suit your business. Each business has its own insurance needs, so make sure you’re aware of the risks your business faces before you buy coverage. Shop around and seek expert advice to ensure you end up with the right level of cover.

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