What Is Cyber Insurance?
An insurance policy that provides coverage in the event of a cyber-based claim such as identity theft, fraud, or phishing.
Cyber is not necessarily short for cybercrime. Cyber insurance is not limited to the internet, or cyber something or another. It is used in a variety of instances and feels more relevant than most business insurance options, which is why it is rapidly becoming a favorite among many business owners.
The newest type of insurance on the market is a sub-category of the risk management classification is insuring a company or business against a cyber attack. And although it was born out of a need for insurance for businesses, it is increasingly becoming popular with individuals as well.
What First-party Cyber Liability Insurance Covers
Information Technology (IT) executives need to keep their customers’ data safe and protected. That’s why they rely on some form of cyber liability insurance to protect them from being held legally responsible for the loss of customer information.
Cyber liability insurance is protection you can buy to say to customers’ businesses that your organization does not intentionally lose valuable customer information and that you have the right protection in place to ensure they keep safeguarded.
Cyber liability insurance covers compensatory damages as a result of denying reasonable traffic the right to communicate in a timely manner with business management. Cyber liability insurance covers third-party claims for loss of customer data and business interruption due to the denial of reasonable traffic the right to communicate in a timely manner with business management. It covers up to a pre-established limit, and it usually has limits based on annual customer data storage and interruption loss.
Why First-party?
The most common use for cyber liability insurance is for cyber liability under first-party insurance (personal liability) for businesses that are reviewing information that could be taken to be sensitive customer data.
This is only the beginning of cyber liability insurance and it isn’t exactly insurance. It’s much more of a liability release. It’s adding one more layer of protection to prevent a situation from ever happening.
What Third-party Cyber Liability Insurance Covers
Cyber liability insurance is a special type of coverage designed to protect your business from losses caused by any unauthorized use of your data or computer systems or the contents of those systems. Cyber liability insurance doesn’t protect you from every kind of data breach. In general, it covers damage to your business if your systems are compromised by threats such as malware, viruses, spyware, hackers and other unauthorized data access software. It also covers general liability claims related to improper or fraudulent actions taken using your business’s data or computer systems. Finally, it provides coverage for liability claims arising from any failure, whether negligent, to take action to protect sensitive information.
This insurance will cover you if your business is so actively involved in the business of the other party that it is reasonably in the scope of your business.
The insurance policy will not cover you if you are responsible for your own data breach or if you do not take reasonable measures to protect your systems from unauthorized access. It is the responsibility of the parties involved to be aware of the coverage available to them under each policy purchased.
The details are evident: Coverage for your business if your computers are hacked, your data is misused, or your company is sued in conjunction with a data breach that allows attackers to steal and use that data for their own personal gain.
Cyber Insurance Coverage Options
Cyber insurance is a growing market and a valuable source of recovery post-sales. The policy coverage includes protection for customers for everything from data loss and business interruption to an authorized user’s account.
Compliance with the Cyber Security Improvement Act (CSIA) is the most important thing for any organization, and this act is aimed at helping organizations to adopt policies and standards to create a safe environment for all users of the Internet. Compliance is the biggest focus for business and industry today, and in order to ensure business continuity, your organization should adopt the best security policies and practices to protect their customers and employees… as well as saving them from costly cyber-attacks and devastating data loss.
Data Breach Insurance vs Cyber Liability Insurance
Do Small Businesses Need Cyber Liability Insurance?
Cyber Liability Insurance can protect you from the consequences of a cyber security breach. Small businesses are at a higher risk for cyber attacks. A small business could be a large multinational business, a sole proprietorship or a partnership, a limited liability company, a publicly chartered domestic or foreign corporation, or an unincorporated association.
There are five main factors in deciding whether you need cyber liability:
- The size of your operation The type of business you are operating (online or offline) Your type of physical business location (offline or online) The type of business you are in (backup, construction or collision claims)
- When To Consider Cyber Liability Insurance
Cyber Liability Insurance is available for both online and offline businesses. Regardless of your business’s size, no business is immune from cyber threats. Cyber Liability Insurance can help protect against significant financial damage, such as if your company’s data, reputation and finances are compromised by a cyber attack.
How Much Does Cyber Liability Insurance Cost?
Cyber Liability Insurance Costs
Cyber liability insurance is typically a one-time fee to cover a subscription to a cloud storage service or online backup service.
Cyber Liability Insurance Costs by Industry
Although cyber liability insurance costs vary by the type of industry that you belong to, some of the most common industries are given below for a broader comparison.
The following industry-wise breakdown is not exhaustive, but it does give a general idea about the average costs for cyber liability insurance for major industries such as Business Services, Consumer Goods, Media & Entertainment, and Utilities.
Although the amounts are not explicitly stated, the rates of insurance premiums are not applicable for individuals or sole proprietors, as individual and sole proprietorships are not eligible for the insurance.
Top Cyber Liability Insurance Providers
There’s a good chance that you’ve heard of cyber liability insurance (CLI). It’s the controversial insurance that protects organizations from the risks of big data breaches and data loss.
But who needs cyber liability insurance? And how much will it cost? Learn more about the benefits, costs, and coverage you’ll receive when you opt for cyber liability insurance.
Cyber liability insurance helps organizations safeguard themselves when their systems or data are breached. It provides top-notch coverage for privacy, fraud, data breach, and data loss, which are all the risks that can come about when you store, manage, and use sensitive client data or big data.
In addition to addressing data breach, privacy protection, and data loss, cyber liability insurance also minimizes the chances of business interruption and brand liability.
This gives organizations the ability to focus on their core business instead of focusing on insurance paperwork, which helps save a lot of time and costs.
So, who can potentially benefit from cyber liability insurance?
The key players to benefit from cyber liability insurance are corporations, nonprofit organizations, and educational institutions. Hotels, retailers, and other types of businesses are also good candidates for CL policy.
This differs from other types of commercial insurance wherein they serve different purposes.
CyberPolicy
Com Liability Coverage and Policy Contract Information
As we continue to spend more time online, the need for Cyber Liability Insurance is growing. To help you understand the need for Cyber Liability Insurance, let’s talk about who needs Cyber Liability Coverage:
Anyone who’s doing business online needs cyber liability coverage
Since most of the websites you visit have some type of business component to them, anyone regularly doing business online needs cyber liability coverage. This includes but is not limited to:
- Any organization that has a website
- Any business that has an open Wi-Fi connection within their Intranet
- Any business that generates revenue online
- Any business that accepts payments online, including online shoppers and online vendors
- Any business that provides an e-mail address
- Any business that uses a cloud-based service
- Any business that offers any type of online service
- Any business that utilizes social media to promote their products or services
- Any business that has a mobile business presence
The Hartford
Over the last two decades, the cost of Cyber Liability insurance has skyrocketed. Within the insurance industry, Hartford was regarded as one of the few insurers willing to write such policies. At one point, the premiums for such policies would have been too high for most companies to not only self insure, but to self insure properly.
Travelers
While this may be true in some cases, but the knock on effect from a data breach can be nasty and far reaching and can include data breach lawsuits, fines, civil charges, data destruction expenses, and reputational damage.
A recent decision of Russia’s supreme court plus the recently enacted EU General Data Protection Regulation (GDPR) reflect the concern of governments and regulatory bodies in the world for data protection rights. These factors clearly prove that even for small number of business travel trips from one location to another, cyber liability insurance should be considered.
What is cyber liability insurance?
Cyber liability insurance is insurance coverage or a letter of credit that an organization will provide to reimburse losses associated with a cyber security breach.
Typically cyber liability insurance is written by a third party company that acts as a neutral, offshore service provider that provides coverage for business travel. A strong risk management program is implemented by the organization to minimize the risk of cyber liability insurance.
Relation Insurance
If you’re a small business with a computer on the premises, you definitely should consider cyber liability insurance. It’s not only a requirement with lenders and creditors, but it can make a difference on your insurance rates as well.
This liability insurance protects your business from any potential liability that may occur as the result of information technology and other cyber crimes. Many business owners are unaware that they are vulnerable to cyber crimes like spam, fraud, ID theft, viruses, phishing, hacking or adware that can cause significant damage to their business. Some of the most costly cyber crimes that can result in costly claims are things like data breach or theft of confidential information. Protect your business from the risks that come along with the internet.
CNA
Cyber Liability Insurance Frequently Asked Questions (FAQs)
Why should I buy cyber insurance?
The world of cyber security is becoming increasingly complex, with the top global enterprises spending billions of dollars a year on protecting themselves from the latest threats. These threats come in the form of online viruses and malware, phishing schemes, and network breaches. For smaller, more complex organizations, the rising threat of cyber related business interruption has forced a large increase in the costs of operating and securing their online assets today.
Cyber insurance is able to provide coverage against loss or damage to business assets of any size from online attacks. This includes businesses of all types (including the largest companies in the world) and all online assets, such as websites, network infrastructure, email, customer databases, and much more.
Smart organizations, those with a small number of employees, often move toward self-insuring for their physical business assets, like their office space and other tangible assets, leaving a greater risk exposed for theft or damage.
To prevent future losses, and to offset potential claims from the rapidly evolving cyber security threat, companies should consider purchasing cyber insurance that covers the business risk related to lost or stolen confidential information and proprietary security mechanisms, and loss of business opportunity due to your website going offline.
What type of cyber insurance should I get?
Based on the nature of your business, you should select your cyber insurance policy carefully. For example:
How much cyber liability insurance do I need?
Cyber liability can be a real drag for your business, especially if things go wrong. Your cyber liability insurance provides coverage to cover the costs of a cyber leak or hack, loss of data, and downtime resulting from hackers.
When you’re evaluating your cyber liability insurance needs, you need to consider how many locations you have, how much data you store, and how often cases of cybercrime happen.
Generally, if your company is a sole-proprietor and does not have much data on stock, you might not need much cyber liability insurance. But if your business stores large amounts of data, such as customers’ names and other confidential information, you might need a lot of cyber liability insurance.
Over the last 5 years, the volume of cyber attacks has increased by a staggering 573% (Source: Symantec). Attacks are evolving from simple ones to more advanced ones that can bypass traditional security mechanisms.
Nowadays, many attacks can be automated, which means these attacks can be performed by a system or network of computer systems on your behalf.
As the cyber threat landscape constantly evolves, it’s important to monitor your coverage to ensure that you have the right level of cyber liability protection.
What isn’t covered by cyber liability insurance?
When it comes to protecting your business from loss resulting from post-breach incidents, you’ve got a lot of options, but you shouldn’t have to pay for every instance of potential claim. Cyber liability insurance is a type of policy that works with your existing business coverage to include coverage for the “remote cyber viruses” and “remote cyber crime” that may affect your business. Given the rapidly evolving nature of technology and cyber security threats you should investigate products including cyber liability insurance that could help protect you from malicious hackers.
Who should buy cyber liability insurance?
In the event of a data breach, even when there is no loss of information, data breaches can be a huge hassle, and even damage your reputation with customers and potential new accounts. Worse, a data breach can lead to an ensuing loss which can be catastrophic to you and your company. However, given the potential future losses and exposure a data breach can have, we recommend that companies take a proactive approach to protecting themselves against data breaches and the associated costs.
Should there be a deductible?
Bottom Line
Cyber Liability Insurance
Cyber liability is the risk of being sued for losses resulting from an intrusion into your computer system. Cyber insurance policies that cover this risk are often bundled with traditional general liability policies. For most of us, cyber liability insurance is part of our general coverage package. But for tech-savvy business owners, the protection of cyber insurance can be particularly important in protecting a company’s reputation if a hacker successfully breaches its network. Cyber insurance also can help protect a company’s finances if a cyberintruder diverts its online assets into fraudulent accounts and accounts receivable into fictitious accounts.The common insurance policy form that deals with cyber liability is known as the BOP (business operations policy). This type of policy is provided by the NICB (National Insurance Crime Bureau) and generally offers the following coverage:
{1}. Ownership and use of a computer is covered. Essentially, the policy represents that the computer system and the software installed on it are considered the company’s property, not yours.
{2}. Data processing is covered. The policy protects against the loss of computerized data. This can include any data stored on the company’s network or stored on a private line. Information like accounting records, customer lists, or any other information the company creates for its customers and makes available to them via its network are considered part of the policy.