This article is provided and written by Winsor Consulting.
Technology seemingly never ceases to amaze us. It seems as though every day a new software or phone sweeps the world by storm. But where there’s good, there’s bad. As these technological advances climb their way into our pockets and offices, so do the cryptic-criminals.
It’s no surprise that cybercrime has become an ever-present threat to businesses, no matter their size or industry. Cyberattacks can have devastating financial consequences, including lost revenue, legal fees, and regulatory fines. That’s where cyber liability insurance comes in. This type of insurance policy helps protect businesses from the financial impact of cybercrime, providing coverage for costs such as data recovery and restoration, lost income due to downtime, legal fees and litigation expenses, notification costs, and more. In this blog post, we’ll explore what cyber liability insurance is, why it’s important, and how to determine the appropriate coverage levels for your business.
What is Cyber Liability Insurance?
Cyber liability insurance is a type of insurance that is designed to protect businesses from financial losses resulting from cyber attacks, data breaches, and other cyber incidents. This insurance can cover a range of costs, including legal fees, notification costs, public relations expenses, and credit monitoring services for affected customers. It can also provide coverage for lost income and damage to a business’s reputation. As cyber attacks become more common and sophisticated, cyber liability insurance is becoming increasingly important for businesses of all sizes.
The seemingly annual “Cost of a Data Breach Report” by IBM Security, the average price of a data breach in 2022 was $4.35 million globally, making cyber liability insurance an essential investment for any business that handles sensitive data or relies on technology to operate.
When insuring a company with cyber liability insurance, carriers assess the level of risk exposure and determine the appropriate coverage. Carriers consider a range of factors when assessing the risk exposure, including the size of the company, its industry, its cybersecurity posture, data security practices, regulatory compliance, and incident response plan. IBM’s 2022 Cost of a Data Breach Report found that the average cost of a data breach was $9.44 million for U.S. companies, with the healthcare and financial services industries experiencing the highest costs per record lost.
$9,440,000
The amount of damage covered by cyber liability insurance can vary depending on the specific policy and the insurance carrier. Cyber liability insurance policies typically provide coverage for costs associated with data recovery and restoration, loss of income due to downtime, legal fees and litigation expenses, notification costs, public relations and crisis management expenses, and more. Some policies may also provide coverage for cyber extortion, social engineering fraud, and other cyber risks. It’s important to review your specific policy to understand the coverage and limits of your coverage.
Determining the appropriate level of cyber liability insurance coverage for your business can be a complex process that involves assessing your risk exposure, potential financial impact of cyber incidents, and available insurance policies. Factors to consider include the type and volume of sensitive data your business handles, your cybersecurity posture, your industry-specific risks, and your incident response plan. A study by Accenture found that the average cost of cybercrime for U.S. companies increased by 29% from 2019 to 2020, making cyber liability insurance an increasingly important investment.
Obtaining cyber liability insurance can be done through an insurance broker or agent. It’s important to work with a broker or agent who has experience with cyber liability insurance and can help you navigate the process of determining the appropriate coverage levels for your business. It’s also important to review the policy language carefully to ensure that it covers the specific cyber risks that your business faces.
Cyber liability insurance is an essential component of any comprehensive cybersecurity strategy, helping to protect businesses from the financial impact of cybercrime. While it’s impossible to completely eliminate the risk of cyber incidents, taking proactive steps to improve your cybersecurity posture and obtaining cyber liability insurance can help mitigate the risk and protect your business from financial loss. By understanding the factors that carriers look for when insuring a company, how much damage is covered, and how much coverage is needed, businesses can make informed decisions about their cyber liability insurance coverage and better protect against cyber threats.