Data security is undoubtedly the biggest challenge for companies in contemporary times. A cyberattack not only compromises the data security of a company but also results in significant financial losses. Unfortunately, IT forensic costs are rising year after year and they don’t seem to be slowing down anytime soon. That’s why more companies are looking for workarounds like cyber insurance to shield their businesses from excessive losses.
So how does cyber insurance help with rising forensic IT costs? Cyber insurance helps by shouldering some of the costs that could have been brought about by cyberattacks and the post-breach damages especially. If you have cyber insurance, you won’t need to pull money out of your own pocket in the event of a cyberattack and the need for a forensic IT team or program.
Global Market Demand and Rising Forensic IT Costs
The global market demand for cyber insurance policies witnesses a steep increase every year. This is because as companies collect and store more data they’re always at risk of an unprecedented data breach or cyber-attack. Another reason for the increase in demand for cyber insurance policies is that resolving issues after a cyber-attack can be an expensive affair.
Globally, the cost of IT forensics is increasing, making it more and more expensive for businesses to look into, recognise, and address the effects of a cyber security breach. Costs for IT forensics have increased by roughly 20% just in the last few years. Notably, the cost of cyberattack-related charges varied considerably between policyholders with healthcare and non-healthcare coverage.
IT forensics can be held responsible for over 2/3 of the cost of a cyberattack for a non-healthcare policyholder. Perhaps the most expensive component of a cyberattack bill for holders of healthcare policies is the legal fees related to them. Many factors have contributed to the rise in IT forensic expenditures, but ransomware assaults are a significant one because they demand ransom payments.
In order for the IT forensic firms’ professionals to examine the infection and find all of the impacted devices before resolving the problem, more complicated cyberattacks require a lot more time and personnel. There’s a significant increase in instances in the market, and demand for IT forensics services is rising.
Costs of a Data Breach and Cyberattacks
The cost of a cyberattack or data breach to a corporation increased by 10% in 2020 to 2021, according to a report released by IBM. Additionally, it was emphasized that given the pandemic and the widespread use of remote work practices, the costs of a data breach were particularly severe.
It’s crucial to realize that the cost of a data breach extends past only the expense of containing the cyberattack and includes any lost revenue caused by a tarnished reputation in the public view.
Data loss might cost as much as $180 for a single record. The majority of businesses have also stated that it may take them, on average, 287 days to discover and contain a data security breach. Ransomware attacks are more harmful than any other type of cybercrime, with a total cost to a corporation of roughly $4.62 million. The following factors must be taken into account when estimating the cost of a data breach:
- Post-breach Response: These charges represent the out-of-pocket costs incurred by the business for providing assistance to victims of cybersecurity or data breach incidents.
- Notifications: These are the expenses related to the company’s notification of data subjects, third-party services, and data protection authorities. These cover the price of calling, emailing, and calling regulators as well as hiring specialists.
- IT Forensic Costs: In the event of a data security breach, these are the expenditures related to detection, escalation, assessment, and crisis management. The price of creating paperwork and corresponding with executives is also included.
- Lost Business: These expenses include the monetary losses sustained by the business as a result of business interruption, lost revenue and lost clients as a result of damaged reputation.
How Much Does Cyber Insurance Cost
There are several aspects of your company that are thought to be the primary determinants of cyber insurance costs, regardless of the type of insurance coverage you’re buying. As a result, the price of your cyber insurance will vary depending on the kind of business you operate and the degree of cyber risk you’re exposed to.
2019 saw an average price for cyber insurance of $1,500 annually for $1 million in coverage and a $10,000 deductible. The average cost of a cyber liability policy with a $1 million per event limit and a $1 million aggregate maximum is roughly $145 per month or $1,745 per year. 39% of small businesses spend less than $1,500 annually on cyber liability insurance, while 41% spend between $1,500 and $3,000 annually.
Of course, the cost of insurance for businesses can vary greatly depending on a number of important aspects. The cost of this protection rises as your business handles more sensitive data.
Factors Affecting Cyber Insurance Cost
There are several factors that play a major role in determining the cost of cyber insurance. These include factors such as the size and nature of the industry in which your company operates in, sensitivity of data, annual revenue, and the amount of coverage you require. Here are a few of them:
1) Size and Industry
The size of your business matters because you run a higher risk of being the target of phishing and social engineering attacks the more employees you have. However, when it comes to figuring out your company’s demands and costs for cyber insurance, your industry is perhaps the single most crucial factor. The type and quantity of data your company maintains will categorize you into 1 of 3 risk groups (low, medium, or high) depending on your industry.
2) Amount and Sensitivity of Data
Low-risk businesses, such as neighborhood shops with a small clientele, will pay less for their cyber insurance than, say, a retailer who collects and keeps credit card information from customers both in-person and online.
A hospital or other healthcare facility that maintains a significant amount of highly sensitive personal data, such as social security numbers, dates of birth, and other extremely private information, would be an example of a high-risk business.
3) Annual Revenue
According to the insurance providers, the more money your firm produces, the more likely it’s that a cybercriminal will wish to target it. As a result, the cost of cyber liability insurance will increase as your company’s revenue increases.
4) Strength of Security Measures
Businesses that invest substantial resources and efforts in combating cybercrime will be rewarded by insurers with lower premiums. High-risk businesses should inform their staff about these hazards and hire professionals to set up security measures, keep an eye on hardware and software security, and create appropriate procedures and plans for what has to be done in the event of a cyberattack.
5) Policy Terms
Your premium will be significantly impacted by the deductible and coverage limitations you choose. The more coverage you have, the more you’ll have to spend. The limits of cyber liability insurance typically range from $500,000 to $5 million per event.
In the case of a cyberattack covered by your policy, the deductible is the portion of the loss that your company is accountable for paying. Businesses should talk to their brokers about the best solutions for them. For instance, if your deductible is lower, you will pay less in the event of a cyberattack, but your premium will be higher.
Cost Versus Risk Consideration
Acquiring cyber insurance requires a critical analysis of your cost versus risk. It may seem pricey to pay for cyber insurance but you also need to consider how much you stand to lose if your company became a victim of a cyberattack. Cyber liability insurance may cost more for network security providers, IT consultants, and other businesses who are in charge of their clients’ cybersecurity.
They require third-party cyber liability insurance, which offers defense in the event that a customer holds their company liable for failing to stop a cyber incident. For the most part, companies only require first-party cyber liability insurance to protect themselves from internal cyber hazards. Businesses that handle a lot of sensitive consumer data, including social security or credit card numbers, pay more for this insurance.
Even if lawsuits resulting from data breaches are covered by your errors and omissions insurance, you’d prefer to stay out of court. Make sure your customers have a risk management strategy that accounts for the expense of a data breach. Your clients will be less likely to sue your tech company in an effort to recover their damages following a data breach if they carry cyber liability insurance.
How to Save Money on Cyber Insurance
The commonly accepted best practice of concentrating on effective prevention and management of cyber threats in order to minimize risks and save on coverage is one subject that consistently comes up when talking about the price of cyber insurance. Your premiums will gradually get better when fewer claims are made against your company that your insurance has to cover.
Employee education is the first step in managing your cyber liability concerns. Employees who are aware of the characteristics of cyberattacks and which suspicious communications to avoid will be less inclined to take any actions that could endanger your company.
Your team will have the awareness needed to avoid falling for these kinds of scams if you ensure that they know what phishing and social engineering look like. It’s a wise investment to have an internal security staff that’s committed to defending your company against cyber threats, especially in high-risk industries.
Making sure that your business partners and any other third parties that have access to your networks are also securely protected and don’t represent a security concern is a crucial component of reducing your vulnerability to cybercrime.
Count On Our IT Experts at Abacus for Your Cybersecurity and Cyber Insurance Solutions
Modern cybersecurity requires more than just being timely. Being proactive and getting ready in advance for contemporary threats might help businesses more. Purchasing cyber insurance coverage is a tried and true method of reducing costs brought on by a cyber intrusion. A highly-qualified team of IT specialists should provide you with comprehensive security solutions to lessen your risks and vulnerabilities to internet threats.
Abacus is dedicated to assisting businesses with their IT, business continuity, and strategic management requirements. Data backup and disaster recovery, consultancy, data analytics, systems integration, and security planning are a few of the services we offer. We also provide suggestions and professional judgment on the type of cyber insurance policy coverage your company needs. Call us right away to find out how our solutions can benefit your business.