What is Cyber Insurance?
Cyber insurance is a product that has been created to counter residual risk associated with the information systems of asset owners. In layman terms, this is used to protect businesses from Internet-based Cyber risks, and more generally from risks are related to information technology infrastructure and related activities.
Many small business owners says that this type of insurance is only required by big companies, and they have to worry about it. But the truth is, that there are thousands of small businesses which handling sensitive information that could be exposed, leaving them liable to numerous claims. Now days every business is connected to Internet and all it takes is one breach, it can be either a sophisticated hacking attack or employee's laptop being stolen, which may cost a lot to the business.
Any business that handles sensitive information over internet is always at risk. A breach or network failure could cost a small business in hundreds of thousands of dollars.
Also, now days many countries have laws that make data breach notification mandatory. And notification of the data breach can be expensive, especially if they need to communicate with thousands of customers via mail, making this type of insurance an affordable way to comply while mitigating costs. As Cyber breaches become more and more common, this insurance will grow to be just as vital to all kind of businesses.
Do I Need Cyber Insurance?
Cyber Insurance comes in handy if your business...
- Uses technology for daily operations
- Keep a database of personal information on pass, current or prospective customers
- WSaves information of employees digitally
- Saves or collects payment information for online sales
- Is located where mandate (law) is to notify the data breach.
Basically, any business or anyone that hosts a website that interacts with the public at large is a candidate for cyber insurance. This includes both commercial businesses and website publishers. Even if you conduct a small portion of your business online or ask customers to trust you or a third-party vendor with their information, you should seriously consider purchasing cyber insurance.
What Does Cyber Insurance Cover?
At a Broader Level...
Cyber Insurance coverage protects your business from a variety of cyber security breach claims and lawsuits. It could be leak of personal information of customers or employees, online hacking and theft of confidential or sensitive information etc.Also, these policies cover third-party costs, which may include their legal defense costs.
Therefore, your policy should cover expenses relating the activities of post breach, like the cost of data breach investigation, legal counsel, cost of communicating or notification of the breach to customers (including mailings), costs involved during business interruption and public relations expenses. Also, these policies cover third-party costs, which may their legal defense costs and resulting settlements and judgments, any liability to banks for re-issuing credit cards and notifying customers, and regulatory fines and penalties. You may also want to plan to get a policy that covers employee privacy liability, in case employee records are exposed during the breach.
Let’s understand in details…
How do you know? It’s the Right Policy.
If It Covers: 3 areas
End to end, Cyber Event Handling
Expenses of an investigation by third parties to establish the extent of the breach;
Expenses of consultation on how to manage legal and regulatory issues;
Expenses of notification management via a crisis communication strategy.
Financial Loss during Cyber Incident
Costs of defence, due to regulatory investigation, and Cost of any data protection fines
Liability, post Cyber Incident
Cost of affected individuals or businesses
Costs of defence and any resulting damages from multi-jurisdictional claims.
But do you know, there are additional areas of coverage available in a Cyber Insurance policy, not included as standard
But do you know, there are additional areas of coverage available in a Cyber Insurance policy, not included as standard:
Business Interruption during Network Failure
This coverage will take care of the increased operational costs and reduced in profits during the Cyber Incident. Please note, this is also known as non-physical damage business interruption, which is excluded from property insurance.
Regulatory fines like PCI Fines and Awards
These costs can be covered by this extension to coverage because there can be heavy penalties in the event of a breach. (If an organsiation is complaint to the Payment Card Industry Data Security Standards (PCI DSS) ).
Costs of Service Providers during Cyber Incident
This extension can provide coverage for resulting costs, expenses and lost profits to a third party service provider suffer a cyber event that impacts the businesses networks, systems or data.
Costs of System Failure
This is also possible to cover System Failure events during Cyber incident because the costs can be significantly high to rectify, claims from customers or loss of profits as well as damage to reputation.
Ransom Costs or Cyber Extortion
With rise of ransomware attacks the extortion events are increasing exponentially, this extension will cover the costs in managing a cyber-extortion situation, and the ransom itself is a critical element of Cyber Insurance Policy.
Digital Media Liability during Cyber Incident
Damages and defence costs incurred due to the Cyber Incident resulting in damage to the third party intellectual property, or negligence in maintaining the electronic content is a coverage which Cyber Insurance provides.
What Does Cyber Insurance Not Cover?
Cyber Insurance does not cover... (*)
- Costs to increase the security and improve systems to mitigate risk of future threats
- Loss of first-party intellectual property
- Future revenue loss that may be attributed to a data breach or network security issue
- Costs of damages resulting from the harm to your business’s reputation
- Hacks by Directors or Partners
(*) – Subject to change by Insurers
What Are the “Limits” on a Cyber Insurance Policy?
For this type of Cyber Insurance policy, first-party coverages are typically offered as sublimits of liability. What this means is that only a small portion of your total policy can be applied to certain cost areas. As per past data, these sublimits were small (for example, a $100,000 sublimit for regulatory fines and penalties as part of a $5 million policy), but recently they have expanded the sublimits. In most of the cases today, your business will be able to apply up to 50 percent of the total policy limit to first-party costs, and some markets will even offer blanket policies with no sublimits. Therefore, please read the wordings of your policy carefully to ensure you will be covered for all the costs you may incur.
Additionally, there are often time-related limits written into these types of policies. That means your network could have to be down for a certain specified number of hours before business interruption coverage would considered. If it’s only down for an hour, you’re likely not going to be able to make a successful claim.
Most frequently asked Question, How Much Does Cyber Insurance Cost?
Cyber Insurance is often added to a Business Owner’s Policy, which can make it more affordable as part of the bundle. However, many small businesses also purchase it separately.
Factors that you’ll need to consider include:
- Your business’s size
- Your industry
- Your level of exposure
- Your business model
- Security controls, security audits and security trainings
Also, some Cyber Insurance policies offer reduced premiums for each year if your business does not have a claim. This can be helpful, particularly when factoring in other expenses, such as the cost of General Liability Insurance.
Purchase an insurance policy and rest easy knowing that in the case of a cyber security incident you’ll be able to focus on what’s most important (repairing your brand’s reputation and its relationship with customers) instead of worrying about how you’ll pay for things like court fees, notification costs and investigation costs etc.
Am I covered by existing insurance arrangements?
Cyber Insurance is one important part of a comprehensive insurance programme. It is likely existing insurance arrangements will have elements of cyber cover but may not provide coverage against all the different scenarios in which a serious cyber event can impact a business. Contact CyberInsurify to undertake a gap analysis of your existing cover to that of cyber to see how you are covered.
Measure my cyber security
In today’s interconnected world, it’s almost impossible to conduct business without using the internet. As a result, the cyber risk associated with data storage and intellectual property has increased and continues to do so. You don’t want to find yourself in a situation where you need cyber liability insurance and don’t have it. Take a close look at your company’s online footprint to determine if cyber insurance is right for you.