The world has entered an era where everything revolves around data and information. Despite the plethora of benefits that come with the internet, a single misclick through a phishing scam or malware could result in a serious data breach and make your company’s system vulnerable to a cyberattack. These attacks can seriously debilitate the continuity of business operations of your company which in turn results in huge financial losses for your company.
So what are some of the reasons why your company needs cyber insurance? With cyber insurance, you can prevent network business interruptions, enhance network security, get protected from privacy and media liabilities, prevent errors and emissions, and get additional benefits as well.
Why General Liability Doesn’t Cover Cyber Liability
Most companies feel safe because they have already opted for a commercial general liability (CGL) insurance policy. While CGL is an integral part of any company’s risk management strategies, it’s nowhere near an adequate insurance plan for cyber attacks. This is because they usually don’t cover the cost your company incurs as a result of hacks, data breaches or cyberattacks. The scary aspect of this is most companies are oblivious to this fact.
World-entertainment giant, Sony, had a rude awakening when its insurance claim to cover for damages caused by a hack was denied as it didn’t come under the commercial general liability policy. A major reason why this is the case is when CGL plans first came on to the scene, they weren’t drafted with cyber security threats in mind. This results in a situation where most of the policy documentation with regards to claims due to cyberattacks is subject to interpretation.
For example, most insurance includes coverage for “tangible property” losses. The question of whether data counts as tangible for insurance coverage reasons has been debated in court numerous times without coming to a clear conclusion. Even if a judge were to finally find in your favor, most businesses wouldn’t have the time or means to present their case in court after a costly cyberattack.
Businesses may be confident they will receive the assistance they require during an attack since cyber insurance is particularly designed to cover hacks, data breaches, and similar situations.
Similarly, insurers are aware of the danger posed by CGL and property insurance policies with unclear language. Many providers are including specific exclusions to their contracts, which forbid payment for data loss or hardware damages, in order to close gaps and solve silent cyber (unintended cyber exposure in traditional insurance).
Why Every Company Needs Cyber Insurance
A common misconception is that cyber insurance is something that only the large multi-million dollar companies require. That couldn’t be farther from the truth and every company needs cyber insurance for reliable risk mitigation when it comes to recovering losses from cyber attacks. While larger companies are at greater risk of becoming a target of a cyber attack, smaller companies are just as vulnerable to data breaches.
Protection against threats to data security are an universal need regardless of the size and industry of your business. The use of insurance and risk management is advantageous for any business that receives, maintains, and transfers digital information.
While cyber insurance may not be able to prevent a cyber attack from happening, it certainly ensures that the financial losses incurred due to discontinuity of business operations and damage to reputation is restored to a certain degree. The losses brought on by malware outbreaks or data theft might be devastating, rendering your organization incapable of recovering, without the safety net that cyber insurance offers.
Different Types of Coverage of Cyber Insurance
No two cyber insurance policies are identical and each plan has its own set of specifications regarding the coverage it provides against cyber attacks. In general, a cyber insurance policy will provide you coverage under network business interruption, network security, privacy liability, media liability, or errors and omissions.
1) Network Business Interruption
This category of coverage discusses how much your company depends on technology to function optimally. It offers cyber insurance solutions for companies that are at risk of going out of business or being unable to resume operation in the event of a cyber attack. This offers coverage for a variety of system failures that occur due to a third-party hack or failed software patch
Network business interruption is a reliable coverage option for the eventuality of your network or the network of a provider on which you rely upon goes down due to a cyberattack. This means that you can recover lost earnings, fixed expenses, and additional costs incurred during the time your business was disrupted.
2) Network Security
For the majority of businesses, including those exposed to information risk and privacy risk, a network security coverage grant is crucial. This feature of cyber insurance protects your company in the event of a breakdown in network security, such as a data breach, malware infection, cyber-extortion demand, ransomware, or compromised corporate emails. Network security coverage takes care of expenses incurred due to a cyber attack which include:
- IT forensics
- Setting up a help desk or call centre
- Data restoration
- Legal expenses
- Monitoring credit and restoring identity
- Payment and Negotiation for ransomware demands
- Notifying affected customers about the breach
- Public relations expertise
3) Privacy Liability
Information about customers and employees can be sensitive, and leaks or violations that reveal such data not only jeopardize the security of people affected but also put your company at risk of lawsuit.
Your business is shielded from liabilities by privacy liability coverage in the event that a cyber incident or privacy law violation occurs. These third-party expenses may result, for instance, from liabilities necessary to fulfill a contractual commitment or even from governmental and law enforcement regulatory inquiries.
4) Media Liability
This offers protection against intellectual property violations originating from the promotion of your services that aren’t patent violations. This also applies to both your print advertising and internet advertising, such as social media posts. Consider these types of coverages a fail-safe against irreparable loss to reputation caused by a cyberattack.
5) Errors and Omissions
You can be prevented by a cyber incident from carrying out your contractual responsibilities and providing services to your clients. Error & Omission coverages protects against lawsuits brought about by mistakes made while providing your services or by their non-performance. This can include professional services that are more typically provided by lawyers, surgeons, architects, and engineers, as well as technology-related services like software and consultancy.
Error and omissions coverage can pay legal defense fees or indemnification resulting from a lawsuit or dispute with your clients. It also tackles charges of carelessness or contract violation should these things happen.
6) Additional Coverage Benefits
Apart from the regulatory insurance coverage agreements, some insurance policies offer additional coverage benefits to companies. These are often given only when they are asked for or if you’re a new client. A few examples of additional coverage benefits are:
- Reputational Harm: The continued financial cost of a cyber incident caused by brand reputation damage is called reputational harm. This typically lasts for a limited amount of time and includes aversion to a brand after a widely reported cyber catastrophe, like a privacy event or security breach.
- Social Engineering: The purpose of social engineering coverage is to safeguard businesses from scenarios involving funds transfer fraud. The most frequent instance is when a worker is tricked into transmitting money from your bank accounts to an evil hacker.
- Bricking: The expense of replacing technology equipment that has been rendered worthless by a malware assault is covered by this upgrade. You’ll know where to turn for coverage if your laptop or server stops becoming as useful to your company network as a brick.
Understanding What Cyber Insurance Doesn’t Cover
It’s equally important that you understand the kind of cyber events that are typically not covered by cyber insurances. This will ensure that you’re aware of when you can’t claim insurance coverage. Some of the most common exclusions or exemptions are as follows:
- Data breaches due to natural calamities, war, terrorism, etc.
- The loss of future revenue that is speculative in nature
- Loss of company evaluation as a result of intellectual property theft
- Losses incurred due to lack of infrastructure or data security measures
- Out-of-pocket costs incurred to upgrade internal technological systems, such as any software or security updates following a cyber event.
Get Professional IT and Cybersecurity Services for Your Business With Abacus
Cyber insurance policies are a necessity as every business is digitalized on some level. It can be hard to weigh your risks versus the cost of cyber insurance when deciding on a policy for your business. Here’s where we come in: Abacus has a team of experts and IT professionals who will analyze your requirements before providing you with their expert consultation on which coverage would best suit your company’s needs.
Cyber insurance is no replacement for cyber security and as such we offer high-quality IT solutions for all your data security needs. Our team of IT professionals and amiable support employees are always available to answer your cybersecurity questions and can assist in addressing any potential hazards before they become major problems. Give us a call today to learn more about how we can strengthen your data security measures.