While businesses are susceptible to numerous physical dangers, including property damage, loss, and injury, your firm also faces hazards associated with technology use. These range from data breaches to cyberattacks. To mitigate these risks, many organizations supplement their business insurance coverage with cyber insurance. This provides additional protection beyond their existing cybersecurity efforts. Read on to learn more about cyber insurance and the latest premium increases.
What Is Cyber Insurance?
Cyber insurance is a type of insurance that provides comprehensive coverage to safeguard businesses against various technology-related threats. Generally, two distinct cyber insurance products are available: Data breach insurance and cyber liability insurance.
Data breach insurance assists your firm in responding to security breaches and may provide sufficient coverage for small and medium-sized business owners. Cyber liability insurance is often reserved for larger firms and provides additional coverage to assist with the prevention, response, and recovery from cyberattacks.
Why Businesses Require Cyber Liability or Data Breach Insurance
Hackers target sensitive information, including personally identifiable information (PII) or protected health information (PHI), stored on your organization’s computers. That is why it may be critical to safeguard your organization with a data breach or cyber liability insurance, which will assist you in quickly responding to a data breach or cyberattack.
These coverages may be beneficial if your business’s computers become infected with a virus, exposing private and confidential data. It can also assist businesses in case customers or patients sue the organization over the loss of PII or PHI. Hefty public relations expenditures as a result of a data breach may also be covered.
It is critical to understand what your business insurance covers. This is particularly true in the case of cyber insurance. While both policies have some benefits, they safeguard your organization in unique ways and should be considered supplemental to your cybersecurity efforts.
What Is Data Breach Insurance?
This insurance covers you in the event that PII or PHI is lost or stolen, whether as a result of your network being hacked or an employee leaving their laptop in a restaurant. If your small business is a victim of a data breach, this coverage can assist in paying for the notices to customers, patients, or employees who are impacted, and also the services of a public relations business.
It may also help provide credit monitoring services to victims of data breaches. You can consider adding the following coverages to your plan:
- Coverage for company income and additional expenses to replace lost income if you are unable to operate your business due to a data breach.
- Prior actions coverage to pay for claims resulting from a breach that occurred prior to the effective date of your policy.
- Extortion Coverage to cover the cost of ransoming your business’s data if someone steals it and demands a ransom.
What Is Cyber Liability Insurance?
Cyber liability insurance, tailored for larger businesses, assists in recouping financial losses incurred as a result of cyberattacks or other technology-related dangers, as well as private investigations or lawsuits in the aftermath of an attack. For instance, if a hacker seizes control of your systems, begins deleting files, and demands a ransom, this insurance can assist you in responding to the attack and reclaiming lost assets and revenue.
In case of a cyberattack, cyber liability insurance can assist in covering the legal services that assist you in complying with state and federal rules, expenses associated with notifying impacted customers, and extortion payments made to unlock encrypted files following a ransomware assault.
It will also cover income lost due to a network failure and any fines imposed by state and federal regulatory agencies.
What Is Not Covered in Cyber Liability and Data Breach Insurance
It is critical to understand that these insurance policies do not cover all types of claims. Additional types of business insurance may be required to establish a full protection plan, including the following:
- Commercial property insurance protects the physical site and equipment of your firm, whether it is owned or rented.
- General liability insurance protects your organization against accusations that it caused property damage or personal injury.
- Employment practices liability insurance can help protect your business against employee claims of harassment, discrimination, or wrongful termination.
- Professional liability insurance protects you against claims arising from errors or omissions in the performance of your professional business services.
The Cost of Cyber Insurance
With numerous factors to consider, the cost of cyber insurance will vary from one organization to another. The cost of a data breach or cyber liability may vary depending on the customer, client or patient count, the type of sensitive data and information, and revenue history.
Cyber insurance rates for small firms have grown 7% year over year, and smaller organizations classified as low-risk pay an average yearly cyber insurance premium of $1,589 for $1 million in coverage. These increases were closer to 20% for midrange and larger firms. An ongoing cyber insurance premium rise is expected until 2022.
One specialty insurance distributor warned that there are fewer insurers willing to insure $10 million limits, and the majority of customers that acquired a $10 million limit from a single carrier in 2020 will see their limits halved.
As ransomware extortion demands continue to rise, limit adequacy may become an issue. However, benchmarking acceptable limitations is impossible given the current level and continuous expansion of ransomware demands. Ransomware has been the leading cause of claims in the last year, both in terms of severity and frequency.
Does Your Organization Need Cyber Insurance?
All businesses should consider making an investment in cybersecurity, especially if their operations involve handling sensitive business, customer, or patient data. Here is what to consider when deciding whether your organization requires additional data breach or cyber liability insurance:
- Do we collect, store, transmit, or receive personally identifiable information (PII) or protected health information (PHI)?
- What would we do if we were subjected to a cyberattack?
- Do we operate in an industry that requires us to adhere to strict privacy regulations, such as healthcare, education, or finance?
Protect Your Data with Windes Cyber Security
Most small firms may not require more than data breach insurance. On the other hand, larger organizations or small businesses with a high volume of sensitive data may require cyber liability insurance for additional protection beyond standard data breach coverage.
In any case, it is essential to understand that cyber insurance is an additional safeguard to the comprehensive cybersecurity services provided by Windes. Insurance does not replace having reliable cybersecurity in place. To learn more about our services and how to better safeguard your organization, request a complementary cybersecurity health check from Windes today.