Even if your business is not technology-centered, you likely have electronic data. The use of electronic data has increased convenience, speed, and efficiencies, but it’s also increased cybersecurity threats. Therefore, you should optimize your cybersecurity practices and carry a solid cyber liability insurance policy.
What is Cyber Liability Insurance?
Cyber liability insurance covers financial damage that emanates from cybersecurity issues like cyber breaches. The policy will typically cover financial losses resulting from data breaches, denial of service, hacking, viruses, and other cybersecurity incidents. These include regulatory penalties and legal expenses emanating from civic suits. Your cyber liability insurance will also go beyond the basics covered by your general liability policy, which typically doesn’t cover data breaches and cyber-attacks.
Who Needs Cyber Liability Insurance?
It’s in the best interest of all businesses to carry cyber liability insurance. For instance, if your business sells products or services online – a process that entails storing and maintaining sensitive data, including contact information and credit card numbers, you should consider getting cyber liability insurance. A data breach means furious customers, lost sales, diminished credibility, and other negative effects down the road.
What Does Cyber Liability Insurance Cover?
Cyber attacks are costly; Ponemon Institute and IBM estimate that the average cost of data breaches is $3.8 million, and it takes up to 280 days to identify and manage a breach. Your cyber liability insurance can cover the following:
- The cost of investigating and dealing with security flaws.
- The cost of notifying everyone affected. If you fail to notify, you can be penalized.
- Credit monitoring for the affected parties.
- Lost business opportunities due to reputational damage. You may need to manage the reputational damage by hiring a public relations company.
Why is Cyber Liability Insurance Vital?
Cyber attacks can be devastating. 60% of small businesses fold up after a cyber attack. Once hackers have gained access to your customers’ and employees’ information (home addresses, credit numbers, and Social Security Numbers), they can wreak havoc on the affected individual’s lives. Hackers can also steal your business’s funds and ruin your credit. If you’re contemplating whether you need cyber liability coverage, think of the costs that come with fixing the damage caused by cyber attacks. The expenses include:
- Interruption of business operations – After a cyber attack, businesses generally have to halt business operations to investigate how the attack happened and the extent of the damage. According to Marsh’s recent report, the average downtime is 22 days, and it’s risen 16% YOY. Data exfiltration has also increased by 66% YOY to 83% of cyber attacks. Therefore, a cyber attack can lead to many days of lost revenue, in addition to bad publicity and loss of reputation.
- Notification and discounts – Notifying the parties whose data has been compromised takes time and effort. You may also need to provide credit card monitoring services and discounts to appease those affected and hopefully retain them as customers or partners.
- Security upgrades – To respond to a cyber breach, you’ll likely need to overhaul your cyberinfrastructure (for instance, train staff on new protocols and set up new infrastructure). Besides, many of the merchant services arrangements specify that the business is responsible for the expenses of forensic investigation, getting new credit cards, and other costs associated with cyber breaches.
- Rebuilding reputation – Depending on the kind of business you’re in, you may have to hire a PR firm to help you rebuild your reputation.
How Humble & Davenport Insurance Brokers Can Help
The extent of potential losses resulting from cyber attacks is more than most businesses can shoulder without proper cyber liability insurance coverage. For business insurance policies that will adequately protect your business, contact our experts at Humble & Davenport Insurance Brokers, Inc.