The cyber liability insurance world has many special challenges. No business is safe from a data breach. This has been proven by high-profile companies such as Sony and Epsilon who made headlines due to their data breaches. In addition, hackers are continuing to advance their strategies. Following are a few key trends in the cyber liability insurance world:
The top cyber liability concerns are negligence and hacking. Underwriters understand that mistakes happen. However, they really want to make sure the damage is limited if data breach occurs. The way insurance carriers prevent negligence is by making sure that portable devices are encrypted. This reduces the risk substantially, because it’s very difficult for hackers to break encryption.
Regardless of whether cyber breaches are caused from cyber-attacks, internal or third-party data center errors, or plain carelessness, companies need to have cyber liability coverage. Firewalls and other technologies can block many malicious Trojans, worms, and viruses. However, a security breach can inflict damage to a business’ reputation, profits, and even put a company out of business.
Hackers can gain access and disrupt networks easily. This was evidenced with last spring’s Global Payments data breach which affected data belonging to approximately 1.5 million credit card holders. This breach also affected a large number of Global Payment’s servers.
Cyber-attacks aren’t the only problem. Inadvertent breaches which result in loss of medical records, credit card, and banking account information, exposes the victims to deep emotional and severe financial desolation. These victims now have the legal right to sue the company from which their data was breached.
Cyber liability provides six key coverages: data loss and system damage, business interruption, notification expenses, public relations/crisis management, content liability, and regulatory investigation expense. Data loss, system damage, and business interruption resulting from a covered cyber liability peril reimburse a business for those losses. States require companies to notify the victims of data breaches and these notifications can be costly. A business that incurs a data-breach loss will have to hire a public relations company to minimize the damage to its brand and these services are also quite costly. Make sure your cyber liability policy also includes coverage regulatory investigation expenses.
If you don’t have a cyber liability policy in place, your company has to pay for all damages associated with a data-breach out-of-pocket. A loss of data for 1,000 records could cost up to $200,000 and 5,000 records could cost up to $1,000,000. These figures don’t account for damages resulting from law suits. Can your company afford to pay for these out-of-pocket expenses?