What is Cyber Liability Insurance?

You have insurance to cover your car, your health, your home, and your business’ assets. Consider cyber liability insurance as an insurance policy for your network. Cyber liability insurance is also known as cyber risk insurance or a cyber insurance policy. It’s important to understand that, while some business liability insurance offers limited cyber risk insurance, these limited policies will most likely not cover you in the case of a data breach.  

Who Needs IT?

Any business, regardless of size, that collects and stores data, sensitive client information, trade secrets, and other proprietary information needs cyber liability insurance. This applies no matter how or where your data is stored; in the cloud, mobile devices, PCs, servers…no data storage is fool-proof, and wherever data is stored, there is vulnerability. Unless your business can withstand the costs of a data breach (and few can), cyber risk insurance isn’t just a good idea. It’s a necessity.

What Does Cyber Liability Insurance Cover?

The consequences of a data breach touch every aspect of a business, from a tarnished reputation to regulatory fines, downtime, court and legal costs, and even ransomware payments. The specifics of what is covered by cyber liability largely vary depending on the insurer that you are purchasing your insurance from. There is no such thing as general or standard cyber liability insurance because each insurer has its own services and its own level of security that it can provide to customers. However, your cyber liability coverage should cover, at the minimum, legal costs, regulatory violation fines, and incident response including investigations and data recovery. Make sure you read the fine print before signing on the dotted line. Insurance companies can often throw in clauses and loopholes that will absolve them from paying a claim. One example is a refusal to pay for state-sponsored attacks, a big part of many ransomware threats. Make sure that you are purchasing both first-party (your own business) AND third-party (your customers) policies.

First-party coverage

This coverage includes financial support for immediate expenses that occur immediately after a cyber breach. This includes:

• The cost of notifying the employees and public that were affected
• Repairing any damaged software or hardware that was lost in the process
• Protecting the company’s reputation through public relations and marketing
• Any business interruption costs that may have happened
• Extortion money
• Any other ancillary costs

Third-party Coverage

This coverage is specifically designed to help the company finance any lawsuits and legal claims. This includes:

• Privacy lawsuits that will seek compensation for breach of customer or employee information
• Any fines that may occur from regulatory bodies
• Media liability claims such as copyright or slander
• Breach of contract or negligence claims

Aside from the regular first- and third-party coverage, some companies will also include more personalized coverage that suits the business. For example, they may provide mitigation services that will help you to recognize any weak security points in your company as well as identify the possibility of cyber attacks before they actually happen.

What is not covered?

Cyber liability insurance isn’t the only coverage that you will ever need in the sense that it doesn’t cover every single type of damage that may happen after a cyber breach. Read your insurance policy very carefully before signing it so you know exactly what you are and are not protected from. Usually, cyber liability insurance doesn’t include the following:

• Any bodily injury or property damage
• Criminal activity in the form of fraud and employee theft
• Any loss of property that may happen

When you purchase any cyber liability policy, you will still need to make sure that you are keeping your own security measures in place. You cannot expect the insurer to cover expenses that could have been prevented had you formed at least a basic security plan for your business. For example, if you don’t install any anti-malware on your computers, the insurer will not cover for any damages if an employee accidentally clicks on an email link that will install malware. In cases like this one, the insurance company will probably deny any coverage.

How Much Does Cyber LIABILITY Insurance Cost?

The estimated costs of cyber insurance policies for a low to moderate risk business averages around $1,485 per year depending on the policy selected. Remember that the more complex your coverage is, the more expensive it will be. You may also need a different level of coverage depending on your industry-specific regulations; for instance, a health care provider will want a policy to cover HIPAA violations. In addition, some other factors for the price of cyber risk insurance can include:

• The number of credit card transactions
• The type of data stored, such as sensitive personal information
• Your industry vertical
• Business Size
• Deductible
• How many different aspects of cybercrime you want to protect
• How well protected you already are.

Understanding your risks and the costs of downtime, data recovery, and potential legal liability is necessary for choosing your policy.

NETWORK DOCTOR Understands Cyber Liability Insurance Requirements

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But it isn’t just businesses that have to deal with cybercrime. Any large organization, such as a college or university, that has a culture of openness and sharing is highly susceptible to cyber risk.

Some data breaches are not noticeable right away, while others can cause huge disruptions in operation and a leak of valuable personal and business information.

Cyber Insurance what is it?

Cyber insurance is a product that helps protect organizations from cyber and information technology risks. Although this is still a growing field, the following are some of the most common types of coverage that you can expect on offer:

Breach and Event Response Coverage

This type of coverage covers common costs that are a result of a privacy breach, such as:

• Forensics and investigative services
• Breach notification services such as legal fees, call center and mailing of materials
• Identity and fraud monitoring expenses
• Public relations and event management

Regulatory Coverage

This type of coverage reimburses the costs to defend an action by regulations due to a privacy breach. However, there is no limitation as to what caused the privacy breach. For example, this type of coverage could apply to a failure of security on the part of the company which resulted in a privacy breach, such as someone losing a laptop or emailing a document to the wrong person.

Liability Coverage

This type of insurance protects the policyholder and other insured individuals from the risk of liabilities that may come from lawsuits or similar claims. Liability coverage has mostly to do with financial support should you find yourself in this situation.

Some common types of cyber insurance liability coverage include:

• Privacy liability – Covers the defense and liability for failure to prevent unauthorized use and access of confidential information. It could also extend to personally identifiable information and confidential information of a third party.
• Security liability – Covers the defense and liability for the failure of system security in order to prevent or mitigate a computer attack. This also includes but is not limited to the spread of a virus or a denial of service.
• Multimedia liability – Covers the defense and liability for media tort from online publication. This also includes libel, disparagement, misappropriation of name or likeness, plagiarism, and more.

Cyber Extortion

Cyber extortion usually takes the form of a ransomware attack. This means that the cybercriminal will encrypt a victim’s files or threaten the release of sensitive data unless a ransom is paid. Unfortunately, this is a very common type of cyber attack and can cause a lot of financial and psychological damage to both the company and the individual targeted.

Internal Expenses and Court Costs

The insurer may have the right and duty to defend any claim brought against an insured or may indemnify the insured for reasonable costs incurred by the insured to defend a claim. In order to make this work, the insured will generally be required to cooperate with the insurer in the defense of the claim and provide to the insurer all information and assistance that the insurer reasonably requests.

What Does Cyber Insurance Cover?

These are some of the most common areas of cyber insurance that are covered:

• Coverage for privacy breaches other than those that are electronic or computer-related – This means that personal data may be compromised when paper records are lost, stolen, or improperly handled, which resulted in an unauthorized disclosure
• Events that happened during the policy period but were not discovered until later – Depending on the wording of the policy, it may cover events that occurred during the policy period but were discovered after the expiration of the policy period
• Media in the control of others – meaning that cyber insurance may cover unencrypted media in the care or control of third-party processors

What Kinds of Data Are Covered by Cyber Liability Insurance?

Cyber insurance policies can protect from some or all of the following types of data:

Personally Identifiable Information (PII)

This includes information that permits the identity of an individual to whom the information applies to be reasonably inferred by either direct or indirect means. It also generally includes a person’s name, address, telephone number, social security number, account balances, and passwords. It includes all information that is subject to the Family Educational Rights and Privacy Act.

Personal Health Information (PHI)

This is also most commonly referred to as protected health information and includes any information that contains individually identifiable health information and generally includes any part of a patient’s medical record. This includes health status, provision of health care, or payment for health care.

Confidential third-party/research information

Sensitive third-party data such as trade secrets, designs, forecasts, methods, formulas, and records are in the care, custody, or control of an insured may be considered “confidential” or “protected” information. If an event occurs where there is an unauthorized disclosure of confidential or protected information, this is considered a breach of privacy.

Payment Card Information (PCI)

This includes the personal information held by a payment card brand to process a payment card transaction. It can also refer more broadly to the Payment Card Industry, including its rules, regulations, standards, or guidelines.

What Is Not Covered By Cyber Liability Insurance?

Cyber liability insurance does not cover every single possible loss that a business or an individual may incur.

Typical exclusions involve faulty security measures placed by the business, poor employment practices that result in criminal activity, theft of trade secrets, unfair trade practices, and others.

Cyber insurance policies also typically exclude coverage for any incident or claim that arises from or is based on a willful, intentional, deliberate, malicious, fraudulent, dishonest, or criminal act or omission committed by the insured. The general intent of this exclusion is to prevent the insured from receiving a financial benefit for committing an unlawful or dishonest act.

How to Buy Cyber Insurance

There are many cyber insurance providers available on the market, but that doesn’t mean that each one is the right option for you. Here are some ways that you can efficiently buy cyber insurance:

1. Work with an experienced broker – An effective broker should have a strong, comprehensive grasp of the scope of an organization’s cyber risk; understand and explain how this risk is quantified; provide recommendations on insurance carriers or policies that might be a good fit for the organization, and obtain appropriate coverage and favorable pricing.
2. Conduct a security risk assessment of your business – A risk assessment provides greater transparency into the organization’s cybersecurity controls and helps the organization identify vulnerabilities and potentially make changes to areas in need of improvement, which, if properly implemented, could result in a premium reduction.
3. Implement your own security controls to reduce the premium – Cohesive and interconnected corporate practices geared around people, process, and technology-related cybersecurity improvements reduce risk and can lead to lower premiums.

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Here are 8 reasons why you should purchase cyber insurance to protect personal information and private data.

1.  Data Is Not Covered by Standard Property Insurance

Data is critical for any business’s success, yet it’s not covered by standard property insurance. It’s difficult to measure data from the standpoint of property insurance, which is why you need the expertise of a cyber insurance company to help you in this area.

2.  Everyone Is a Target

Although you usually hear about big businesses being targeted by cyberattacks, it doesn’t mean that small businesses and individuals can avoid being possible targets. In fact, a small business is far more likely to be an easy target because it doesn’t have the financial support to hire an entire IT team to protect its online data at all times.

3.  Credit Data Results in Severe Penalties

If you were to lose any kind of credit data, either from your business, your employees, or your customers, you will have to pay high fines. Credit card crime is a $7.5 billion industry worldwide and is growing every day. The sooner you insure yourself, the better protected your business will be.

4.  Social Media Claims

Unfortunately, social media is a very touchy subject. We share many things on social media both as companies and as individuals, and sometimes we end up making a huge mistake in what we post. If one of your employees makes a defamatory remark, shares your business’ private data, or you happen to be faced with copyright infringement, cyber insurance will help you cover the costs incurred.

5.  Third-party Data Liability

Third-party data is very valuable to businesses and is used all the time to create products and marketing strategies. However, if this data is ever leaked or you happen to lose it, you’ll have to pay huge fines as a result. Lawsuits frequently result from such instances, so you need cyber insurance to cover the costs.

6.  Media Coverage is Expensive

If your business makes a mistake that results in data leaks, not only will you have to deal with lawsuits, but you will also have to deal with the media. You will need to inform both your employees and all of your customers of what has happened and what the next steps are to fix the problem. This costs a lot of money that your business may not be able to spend.

7.  Covers Electronic Business Downtime after a Cyber Attack

Your electronic system downtime after a cyber attack will also not be covered by standard business interruption insurance. On the other hand, cyber insurance will offer coverage for any lost profits during this time so that you can continue to grow your business and provide for your employees and your customers.

8.  Cyber Insurance Protects your Reputation

Yes, everyone can make a mistake, but customers are not likely to forgive you for one that involves their personal data. If you happen to be the victim of a data breach, you will need the help of a cyber insurance company to mend your reputation with your customers. Again, without being covered, expect to pay a lot of money because you may have to issue refunds or the like in order to bring your customers back.

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Nearly every company, of every size, is exposed and vulnerable to cyberattacks. Your company’s privacy, confidential information, and operations are at risk of exposure. This is a massive problem for organizations, which is why more and more people are turning to cyber insurance to protect their businesses from a dangerous, and costly, situation. In 2020 alone, cyber-attacks have cost businesses $150 million to rectify. While both big and small companies are affected by cyberattacks, they really can take a toll on small businesses. Shockingly, 60 percent of small businesses close after falling victim to a cyber attack.

Why every company needs Cyber Insurance

Cyber insurance is essentially an insurance policy that protects businesses from the fallout of cyberattacks. It is often referred to as cyber liability coverage or data breach insurance. Having this insurance policy will help you with financial support for lost files and information, as well as minimizing the stress and disruption that come with this unfortunate event.

Coverage Explained

Let’s dive deeper into the world of cyber insurance and understand what it entails and how to make the most of it. Juergen Weiss, head of Global Financial Services, Research, and Advisory at Gartner, has a great definition of cyber insurance:

“The formal definition of cyber insurance is essentially a contract between an insurer and a company to protect against losses that are related to computer- or network-based incidents.”

However, this doesn’t mean that cyber insurance will cover everything or protect you against any possible attack. Like any insurance policy, you need to understand everything behind it and how it may serve you and your business. Cyber insurance policies include coverages both supplementally and others automatically. Meaning that there are first-party coverages as well as third-party coverages. First-party coverages are associated with costs your company incurs due to a cyberattack. Whereas third-party coverages protect companies from a lawsuit.

Difference between the types of Cyber Insurance Coverage:

• Network Security Coverage

This coverage is essential for protecting the company’s privacy and information. If a company’s network security were to fail, whether it was ransomware, malware infections, data breaches, or cyber extortion demands, cyber insurance would cover this.

• Privacy Liability Coverage

Privacy liability coverage protects your customers’ and employees’ confidential information. Highly sensitive information that is exposed due to a data breach, threatens the security of the company. It is crucial to protect the privacy and information of your company with privacy liability coverage.

• Network Interruption Coverage

Most companies are dependent on technology to function. If a company’s network were to crash, network interruption coverage covers lost profits, fixed expenses, and even extra costs that were spent during the duration the network was down.

• E&O Coverage

E&O (errors and omissions) coverage protects your company from cyber events that hold up the operation and performance of the business. If a company is unable to deliver services or fulfill obligations due to a cyberattack, this coverage will cover the losses.

• Media Liability Coverage

This coverage protects your company from intellectual property infringement. This includes both online and printed advertisements as well as social media content.

What Does Cyber Insurance Cover?

The answer depends on who your policy provider is and the size policy you purchase. As with any insurance policy, the higher the coverage, the more you will need to pay for it.

However, because cybersecurity is such a huge issue around the world, many companies are doing everything in their power to make it accessible to as many people as possible.

In general, a basic cyber insurance coverage will include the immediate costs that are associated with falling victim to a cyberattack.

In the words of Mark Bagley, VP at cybersecurity company AttackIQ,

“Cyber insurance policies are designed to cover the costs of security failures, including data recovery, system forensics, as well as the costs of legal defense and making reparations to customers.”

What Does Cyber Insurance Not Cover?

It’s important to know this Cyber Insurance policy doesn’t cover every type of claim. You may need to have a more comprehensive plan like other businesses that cover: General Liability, Commercial Property Insurance, Professional Liability Insurance, and Employee Practices Liability Insurance.

The coverage examples described here are hypothetical claim scenarios and are intended to show the types of situations that may result in claims. These scenarios are not based on actual claims and should not be compared to an actual claim. Whether or to what extent a particular loss is covered depends on the facts and circumstances of the loss, the terms and conditions of the policy as issued, and applicable law.

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