Major cyber attacks and security breaches have made headlines in recent years, and cybersecurity is a growing concern worldwide. In 2020 alone, well-known companies and brands, such as Microsoft, Facebook, Nintendo, and Twitter, were victims of user security and confidentiality breaches. You may think insurance is only essential for the real world, not the digital one. However, with our society connecting online now, more than ever, it’s important to recognize potential risks and have proper protocols to protect your customers, employees, and your organization. This includes having a cyber insurance policy to protect against the digital dangers of the online world.
Here are some common scenarios of cybersecurity liabilities:
- An outside party hacks your security system and steals customer credit card information and employee social security numbers.
- One of your employees lost a USB that contained confidential customer information, which resulted in an investigation.
- A customer whose privacy was breached due to a system(s) failure sues your company.
- Your organization is under a cyber attack that releases a virus on all-user systems.
- A company-wide system(s) outage results in financial losses and damages your organization’s reputation.
Who is vulnerable to a cyber attack?
Any organization that has an online presence is vulnerable to a cyber attack. This may include collecting customer information online, fundraising, or a corporate website that does not fully secure connection. Even social media can make you vulnerable to hackers. According to PwC’s Global Economic Crime and Fraud Survey 2020, 47% of companies experienced fraud in the past 24 months. Furthermore, the global pandemic has created even more online vulnerability for companies.
You may think that only big banks and businesses are targets of cybercrime. This is not the case. Other sectors hit by cybercrime include communications, chemicals, pharmaceuticals, insurance, and government/state-owned entities.
What are the impacts of cybercrime?
Cybercrime causes significant financial losses, damages reputations, violates privacy, and often results in investment and enforcement costs.
IBM’s yearly Cost of a Data Breach report, conducted by the Ponemon Institute, a U.S.-based independent research institute, found that data breaches’ financial impacts are increasing. Between 2019 and 2020, the cost of data breaches increased for most countries, including Canada, which experienced a slightly higher 6.7% surge. In Canada, 42% of these data breaches were caused by hackers. According to Ponemon, three distinct areas make data breaches so costly:
- There are increasing cyber-attacks and costs to remediate the consequences.
- The consequences of lost business have a more significant impact than the cost of the data breach. This cost component includes customers’ abnormal turnover, increased customer acquisition activities, reputation losses, and diminished goodwill.
- The increasing data breach costs associated with detection and escalation include forensic and investigative activities, assessment and audit services, etc.
Doesn’t my business/general liability policy cover potential cyber-attacks?
Typically, general liability and errors/omissions coverage exclude losses incurred by the Internet.
A cyber policy will fill in those gaps to cover internet-related losses or, at the very least, seriously defray the costs. The proper cyber insurance policy usually includes protocols and internal plans against the cyber risk some companies might not already have.
Ways that a cyber insurance policy fills in these gaps
1. Information Property Protection
Cyber and Privacy Liability protect your organization when your customers claim a cyber breach has caused them financial loss. It also mitigates risks or losses resulting from a network security failure or attack that damages the system and covers the cost of repair if it is expensive.
2. Privacy protection
One lost USB or laptop containing client information could cause massive privacy breaches.
Privacy breaches occur when confidential customer information is compromised in some way. Privacy protection covers the expenses your organization incurs due to an actual or alleged security breach. It includes notifying third parties or employees, independent security audits of your computer system, etc.
It also covers when the security breach causes your client to notify other affected individuals.
3. Theft & Extortion Threats
A cyber insurance policy protects your organization when under direct threat or extortion. These threats may include preventing access to your computer system, introducing a virus, revealing confidential information, or damaging your brand or reputation by posting false or misleading comments about you on social media. In this case, coverage will include investigation and settlement of threats and reimbursing all reasonable sums incurred directly from a specific threat.
4. Business Interruption Insurance
If your system malfunctions or is attacked, your company could suffer financial loss, lose clients, or damage its brand. Cyber insurance is essential to protect your business when a system failure causes financial loss and/or loss of current or future clients. This is especially important for smaller companies that may have a smaller client pool and not have adequate infrastructure in place.
5. Software & Data Integrity
If you are the target of a cyber-attack, getting to the bottom of who the perpetrator was can be costly. With cyber insurance, you will be covered by the cost of investigation, crisis management, and data restoration. This can be huge if you lose sensitive data crucial to your business or organization.
6. Multimedia Liability & Advertising Injury
This protects your company when defamation claims—i.e., libel, slander, trade libel, injurious falsehood, etc.—cause emotional distress or outrage. It can also occur in copyright or trademark infringement cases, such as taking a picture from the internet or a Google search and reposting it without proper credit.
Cyber Insurance: Conclusion
Cyber insurance is a must-have to protect your organization, whether you’re a start-up, big corporation, non-profit, or somewhere in between. Our experienced brokers at isure work with you to create tailor-made security and privacy liability coverage for potential damages and vulnerabilities specific to your operations. If you have any questions about cyber insurance, please contact us or request a quote today!
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