The Internet has irrevocably changed the way business operates, pushing services and commerce into a new paradigm of opportunity and uncertainty. Most businesses today need some sort of online presence to be successful. Businesses today need to be able to sell their products and services, market themselves, and communicate with customers online.
It’s no wonder, then, that the number of cyberattacks against businesses of all sizes is steadily increasing every year. This is important because cyberattacks can be devastating to a business, both financially and reputationally.
While there are best practices you can implement to protect your business from cyberattacks, there is no foolproof solution that completely prevents them. The next best way to protect your business from cybercrime is to purchase commercial insurance to cover some of the risks associated with cyber attacks on third parties. B. Transferring Insurance Company.
Policies designed specifically by insurers to protect companies from this type of risk are Cyber liability insurance.
Who Needs Cyber Liability Insurance?
In today’s business world, it’s hard to find a company that doesn’t require cyber liability insurance. This is necessary if you have a business that stores sensitive customer, customer, and partner data. If your business supports electronic trading, you definitely need it.
One of the biggest myths surrounding cybersecurity is that cybercriminals only target big companies. This really couldn’t be further from the truth.
Attacks targeting small and medium-sized businesses are on the rise, and this trend is expected to continue in 2020 and beyond. In fact, the COVID-19 pandemic is adding fuel to the fire. As more companies ask their employees to work from home and more brick-and-mortar businesses begin offering their services online, social engineering attack and the data breach attempts They will certainly increase in companies of all sizes and industries.
So in most cases the answer is yes. Chances are your business has a real need for cyber insurance. But how much and what type of cyber insurance do you need?
First or Third Party Cyber Insurance
The type of cyber liability insurance a business chooses should always be based on the needs of the business and the business needing protection. In the case of a cyberattack, it is not just the company that is attacked that suffers. For this reason, there are two types of cyber insurance: proprietary and third party.
First-party cyber liability insurance protects your business. Covers all costs related to cyberattacks, including but not limited to:
- Forensic analysis to identify attack sources
- public relations
- Customer notice
- Credit check service
- loss of income
For businesses that work with electronic data, direct security measures are in place to cover the many costs that can be incurred if cybercriminals break into your network and compromise your business, customers, partners, and customer data. I need insurance.
Third-party cyber liability insurance is designed to protect companies that provide professional services to other companies that may be vulnerable to cyber threats.
This coverage can be compared professional liability insurance Cyber liability insurance can provide protection if another company sues you for a mistake that causes loss or damage to that company.
for example, data security from you a law office If you are breached and your law firm is accused of failing to prevent a data breach, third-party cyber liability insurance covers attorney fees, government penalties and fines, and settlements and judgments related to such claims. You can pay.
Types of Common Cyber Liability Claims
In general, cyber insurance claims are most commonly filed as a result of an attack and typically fall into one of three categories: Copyright infringement , social development s malware attack .
Hacking is probably the most common type of cyber attack that results in insurance claims. When a system or network is compromised by a hacker, a company can incur various costs associated with the attack. Party notification costs, publicity costs, and fines are all possible and covered by the Cyber Policy.
Phishing and social engineering attacks rely on someone in your organization to help open the door to your data. A very common example of a phishing attack is when a would-be hacker sends an email impersonating the CEO of a company to an employee and asks them to follow a link. Employees click links to download malicious stuff onto the network, giving hackers access to data.
The best defense against this type of cyber-attack based on employee negligence is to educate and instill vigilance and awareness among employees about these types of threats in the workplace.
Malware attacks are also very common and can come in many forms. The difficulty in preventing malware from entering your system is that different types of malware try to enter your network in different ways. For example, there is ransomware that hijacks systems and demands that companies pay a ransom before releasing or unlocking them.
Whether it’s ransomware, spyware, or a DDoS attack, recovery from malware attacks can be expensive and time-consuming.
How much does cyber liability insurance cost?
Regardless of the type of policy you purchase, there are certain characteristics of your business that are considered the primary reason for coverage costs. In short, the cost of cyber insurance depends on the nature of your business and the level of cyber risk you are exposed to.
According to a recent study by AdvisorSmith Solution Inc., the average cost of cyber liability insurance in 2019 is $1,500 per year for $1 million coverage with a $10,000 deductible. was a dollar.
Of course, companies can significantly increase or decrease the amount they pay for coverage, depending on several key factors.
What influences the cost of cyber insurance?
Let’s take a look at some of the key business characteristics that insurers should research and identify before calculating their cyber liability insurance premium.
scale and industry
Company size matters. The more employees, the higher the risk of phishing and social engineering attacks. However, industry is perhaps the most important characteristic of a business when it comes to determining cyber insurance needs and costs.
Your company’s industry falls into one of three risk levels (low, medium, high) related to the type and amount of data your company stores.
Data volume and sensitivity
Low-risk businesses, such as local businesses with a limited customer base, will pay less for cyber insurance than, for example, retailers who receive and store credit card numbers from customers through their stores, websites, or online. increase. e-commerce.
High-risk businesses are like hospitals and medical facilities that store large amounts of sensitive personal information, such as social security numbers, dates of birth, and other highly personal information.
According to insurance companies, the more revenue a company makes, the more likely cybercriminals will target your company. So, the more revenue your business generates, the more you will have to pay for cyber liability insurance.
Strength of security measures
Insurance companies reward companies that dedicate significant resources and efforts to prevent cybercrime with lower premiums. High-risk organizations educate their employees about these risks, hire experts to install security protocols, monitor hardware and software security, and have appropriate procedures and plans in place to respond to cyberattacks. must be formulated.
Coverage limits and deductibles also have a significant impact on premiums. The higher the coverage limit, the more you will pay. Cyber liability coverage limits typically range from $500,000 to $5,000,000 per incident.
The deductible is the amount of damage that a company is liable for in the event of a cyber-attack covered by the policy. Businesses should consult their broker to determine which option is best for them. For example, a lower deductible means you’ll pay less in the event of cybercrime, but end up paying a higher premium.
How to keep cyber insurance costs down
A constant theme when discussing the cost of cyber insurance is the generally accepted best practice of focusing on properly preventing and managing cyber threats to reduce risk and save margins. .
As with any type of business insurance, the fewer claims an insurer has to cover for a business, the higher the premium will be over time.
Managing cyber liability risk starts with employee training. Employees who have a good understanding of what cyberattacks look like and what questionable communications to avoid are less likely to do things that put their business at risk. Make sure your team understands what phishing and social engineering is, and give them the awareness they need to avoid falling for these types of scams.
As mentioned earlier, having a dedicated in-house security team to protect your business from cyber threats is a smart investment, especially in high-risk industries. Another important aspect of cybercrime risk mitigation is ensuring that business partners and third parties with network access are also well protected and not exposed to security threats.
For more information on cyber liability insurance, please refer to the link below.