Today’s continually evolving cyber risk landscape, where data breaches seem to be near certainties and corporate reputations are at stake daily, is leading many IT professionals to focus beyond just identifying cyber threats and increasing cyber security as it relates to protecting their organization’s data from malevolent intrusion.
Increasingly, today’s risk averse cyber security pioneers are taking a holistic approach to loss prevention that more fully takes into account the possibilities of mitigating the adverse financial impact of a cyber attack by purchasing Cyber Liability insurance.
Almost every business has cyber liability. That’s because businesses of all sizes process, store, and handle sensitive customer or client data that may expose them to Cyber-Crime such as hacking, data theft, extortion and Denial of Service attacks. Credit card transactions, Wi-Fi and e-commerce communications, websites and employee medical records all represent possible points of exposure.
These days, a lawsuit resulting from a data breach could mean that a business is responsible for paying legal fees, court-ordered judgments, class action lawsuit settlements or other court-related costs. A business may be obligated to notify customers of a data breach, provide customers with credit monitoring services and spend money on public relations efforts to repair their corporate image.
Many small-business owners are not even aware of the actions needed to be taken in the event of a data breach and remain blissfully unaware of the unprecedented legal and financial challenges involved which could cost hundreds of thousands, if not millions of dollars. What many businesses don’t know is that their Commercial General Liability (CGL) Policy often entirely excludes or places a nominal sub-limit on damages related to intangible property like electronic data. In the event of a Cyber breach, the company could be left financially responsible for the entire cost of the event.
A Cyber Liability policy can help mitigate these costs
Cyber Liability Insurance can protect businesses of all sizes by paying for legal defense, court-ordered compensation, and other related expenses (as noted in the chart below), so that the victims of a cyber attack can focus on rebuilding and restoring their business and customers’ trust with less concern about breach-related expenses. These policies fill the gaps left by the standard CGL policy.
|Cyber Liability Insurance Coverage is Available for:|
|– Business Interruption (especially important for SMEs with only one line of business)
– Data Breach – Compromise, Loss or Destruction
– Customer Notification
– Computer Fraud
– Funds Transfer Loss
– Customer Credit Monitoring
– Claims Defense
– Regulatory Fines and Penalties
– Losses Resulting from Identity Theft
– Cyber Extortion
– Public Relations (Image Repair)
|Why get Cyber Liability Insurance?
– Your organization can’t afford business interruption.
– Your organization is legally responsible for data – even data hosted or stored in the cloud. A Cyber Liability policy can protect your organization if the cloud provider messes up.
– Your organization’s General Liability insurance may exclude losses incurred because of the Internet. A Cyber Liability policy can pick up where your organization’s general policy leaves off.
– Cyber Liability policies can be more affordable than you think! And since they are still a relatively new concept, there’s much variation among policies and room for negotiation.
What kind of Cyber Liability Insurance to buy?
Cyber Liability Insurance is available both as a “stand-alone policy” and as an “add-on” to a business owner’s policy. The type of insurance your organization needs depends on the specific business in which your business is engaged. However, there are two major types of Cyber Liability coverage:
First-Party Coverage – provides financial compensation to help you address immediate customer and business needs, such as those that result when the in-house IT network goes down. Forensic services, notification of affected customers and employees, customer credit monitoring, crisis management and public relations, business interruption, additional labor and cyber extortion expenses are items for which claims might be made under “First-Party” coverage.
Third-Party Defense and Liability coverage – protects you in the event of a lawsuit brought by a customer or partner for a data breach that your organization’s actions or negligence allowed. It might cover items such as judgments, civil awards or settlements, electronic media liability, network security or privacy liability.
|Risk Management Strategies to get the Lowest Rates on Cyber Liability Insurance
– Keep sensitive information on a “need to know” basis.
– Utilize extensive network security and firewalls.
– Limit the use of portable technology.
– Provide data security training for employees on proper maintenance and control of customer data.
– Provide a Virtual Private Network (VPN) connection for access to computers.
|Tips for Purchasing a Cyber Liability Policy
– Look for a Cyber Liability Insurance policy that covers laptops and mobile devices to ensure maximum coverage.
– Consider integrating Cyber Liability insurance with General Liability and Employment Liability for seamless coverage.
– Work with your insurer to get favorable premium pricing by putting in place a firewall and social media policies that reduce risk.
Staying one step ahead of the hackers is a tall order these days and despite sophisticated security measures, catastrophic data breaches continue to occur. Combined with strong security measures, Cyber Liability coverage is a cost-effective way to mitigate a potentially financially catastrophic risk to the organization. Cyber Liability Insurance allows you to focus on damage control and customer relations and helps to protect your organization against exorbitant losses. Cyber Liability insurance can make the difference between staying in business or going out-of-business. The choice is yours.