Businesses today can unfortunately face threats every day. While the internet is essential for day-to-day business in just about every company in every industry, it’s also a source of potential loss.
Cybercriminals are always on the lookout for ways they can target businesses to compromise the data they hold on their systems to exploit the valuable information contained therein. One way businesses can protect against any losses they suffer as a result of data breaches is cyber insurance. Read on to learn more about cyber insurance and what it covers. If you have any other questions, feel free to contact our team!
What Is Cyber Insurance?
Cyber insurance is a type of insurance policy that covers businesses for the losses they suffer and the costs they incur as a result of a data breach in one of their systems. These events are typically not covered under a business’ general liability coverage since that coverage protects against any damage to property or injuries someone suffers due to the use of a company’s services, operations, or products.
Because cyber events aren’t covered under general liability insurance, businesses must purchase a separate plan that covers them in the unfortunate case that they suffer a data breach.
This is extremely important, as a 2021 threat report published by Thales Data found that 45% of all companies in the United States experienced a data breach within the previous year.
Data breaches are serious and can be expensive since most companies store vital personal information on their customers such as their account numbers, medical records, driver’s license numbers, Social Security numbers, credit card numbers, and contact information like addresses, emails, and phone numbers.
What Does Cyber Insurance Cover?
Cyber insurance coverage can be broken down into first and third-party coverage. The two categories cover both the effects a data breach has on your company (first-party) and the effects it has on your customers (third-party).
First-Party Cyber Insurance
When a data breach occurs, there are many ways that a company can experience loss. Most of these are related to network security.
Included under the umbrella of first-party coverage includes any costs related to IT forensics, data restoration, loss of funds, cyber extortion–such as payment to unlock ransomware–computer fraud, and any loss of revenue suffered as a result of a business interruption.
A lot of work goes into not only figuring out how a data breach occurred but on restoring any data and operations that were lost as a result of the breach. Then, once all that is solved, a company must figure out how they can set up new and better network security to make sure this doesn’t happen again in the future. All of that can be very expensive.
In addition, there can be a significant cost incurred for companies that have to fight a public relations storm as a result of the breach. This is especially true for bigger companies that hold lots of customer data on hand. Cyber insurance can help pay for the costs of all the physical network security as well as the public relations that go along with keeping face and instilling public confidence in the company.
Third-Party Cyber Insurance
There’s a lot more that goes into a data breach than just what happens to the company. Customers’ vital personal information could be susceptible during a breach, and the company may have many costs associated with that.
First, companies are required by law in most states to keep the personal information of their customers safe and secure when they are storing it. When a data breach occurs, companies have to notify their customers of the breach and the potential that this information was compromised.
There is a very serious cost associated with notification. Then, companies have to find a way to instill confidence in customers who may have many questions and concerns. Some companies start up a separate call center or customer service team to respond to these inquiries. Some offer free credit monitoring for a year to all customers whose information was potentially compromised. Again, these are expensive propositions.
There is also the possibility that a business may face liability from civil lawsuits if customers suffered a loss due to a data breach. Many of these cases are class action lawsuits that are brought, and the payouts could total into the hundreds of thousands of dollars very easily.
Cyber insurance covers the costs of the legal fees in this case and also helps with any settlement payment or judgment that is handed down.
Protect Your Business Today
Unfortunately, it’s a reality today that nearly every business in every industry is susceptible to a cyber attack. These cyber-attacks can have huge ramifications for every involved, including a company’s customers.
Data breaches can have long-term and huge financial implications for a business, and the entire process can be extremely expensive. Cyber insurance helps to provide coverage to a business in the unfortunate circumstance that they suffer a major data breach. If you have any questions on securing your data with Cyber Insurance, contact our team at GLIA today!