If your business handles sensitive customer data (such as credit card or bank account numbers), data breaches pose a serious threat to your financial stability.
Cyber Insurance protects business against the expenses associated with a data breach, which can run into the hundreds of thousands of dollars.
A lawsuit resulting from a data breach means your business is responsible for paying legal fees, court-ordered judgements or settlements, and other court-related costs. In addition, your business will likely have to notify your customers of the breach, provide them with credit monitoring services, and invest in public relations efforts to repair your business’s image. In the absence of Cyber Insurance, these costs can quickly drain financial reserves.
When you do carry Cyber Liability Insurance, it protects your business assets by paying for a legal defence, court-ordered compensation, and other related expenses. In other words, cyber liability coverage allows you to focus on rebuilding and restoring your customers’ faith without worrying about the data breach-related expenses
Cyber Insurance Coverage Explained
For many startups and small businesses, Cyber Insurance is available both as a stand-alone policy and as an add-on to a Business Pack Policy.
The two major types of Cyber Liability Insurance are first-party coverage and third-party defense and liability coverage.
First-party coverage offers financial compensation to help you address immediate customer and business needs, such as those that result when your in-house IT network goes down.
Third-party coverage protects you in the event of a lawsuit brought by a customer or partner for a data breach that your business’s actions or negligence allowed. Depending on your business’s specific needs, you may choose either or both types of coverage.
Key Details About Cyber Insurance
The type of data breach insurance you need depends on the specific kinds of work your business does. Below are key concepts to keep in mind when considering which type of Cyber Liability Insurance to buy.
First-party response may cover…
- Legal and forensic services to determine whether a breach occurred and assist with regulatory compliance if a breach is verified.
- Notification of affected customers and employees, including costs such as letter preparation and mailing.
- Customer credit monitoring, as well as monitoring of fraud, public records, and other information as needed.
- Crisis management and public relations to educate your customers about the breach and rebuild your company’s reputation.
- Good faith advertising.
- Business interruption expenses such as costs for additional staff, rented or leased equipment, use of third-party services, and additional labour arising from a covered claim.
- Cyber extortion reimbursement for perils including credible threats to introduce malicious code; pharm and phish customer systems; or corrupt, damage, or destroy your computer system.
Third-party defence and liability may cover:
- Judgements, civil awards, or settlements you’re legally obligated to pay after a data breach.
- Electronic media liability, including infringement of copyright, domain name, trade name, service mark, or slogan on an intranet or Internet site.
- Potential coverage for employee privacy liability as well as network security and privacy liability.
The Risks of Data Breaches Are Real
Many small business owners may not think they need this type of insurance, but startups and small businesses are actually the most vulnerable to security threats. Thousands of small businesses handle sensitive customer credit or bank account information daily, and many are also responsible for protecting customers’ medical information, driver’s license numbers, and other sensitive financial data.
All it takes is one careless mistake by an employee, unauthorised access by a former employee or vendor, unshredded documents, skilled hacker, or stolen laptop, and your company could suddenly face a legal and financial challenge. Combined with strong security measures, cyber liability coverage is a cost-effective way to mitigate that risk.
Protect Your Business with a Rapid Response
If your customers’ sensitive information is compromised, there’s a good chance they’ll opt out of doing business with you in the future. Similarly, potential customers who hear about the security breach will be less likely to work with your firm. You can minimise the negative impact the data security breach has on your business by acting quickly. Swift, decisive action helps restore customer confidence and protect your bottom line.
Cyber Insurance allows you to focus on damage control and customer relations instead of worrying about how much damage your legal defence will have on your bank account.
Business Protection Tips
Implementing the following risk-management strategies will reduce the likelihood that your business experiences a data breach, and may even reduce your Cyber Liability Insurance premiums.
- Keep sensitive information on a “need to know” basis.
Use passwords or physical locks to keep sensitive electronic data and physical files accessible only to those who need it to do their jobs.
- Deploy encryptions, network security and firewalls.
If you have remote employees, limit the use of portable technology and provide a virtual private network connection for access to company computers.
- Train employees on proper care and control of customer data.
Ensure employees understand the sensitivity and liability related to customers’ financial and personally identifiable information. Document processes and conduct regular training sessions as well as security audits to ensure compliance.
How Statewide can Help
- Fast, Efficient Coverage.
- More Choices. All Cyber Insurers sourced, multiple quotes.
- Expert Insurance Brokers. Work with a broker who is familiar with your industry and can explain to you which types of coverage you need.
- Customised Insurance Products. Find an insurance policy that’s tailored to your needs, so you never pay for coverage you don’t need.
- Cyber Cover Website. CyberCover will be launching in the first quarter of 2016, a dedicated online Cyber Liability placement website, developed exclusively by Statewide Insurance Brokers.