Cyber Liability Insurance 101
Wednesday July 28, 2021
The Beginner’s Guide to Cyber Liability Insurance for Business
We have been getting an increasing number of requests about Cyber Insurance, So I wanted to review some of the basics about this coverage.
One thing that has really brought this coverage to the forefront is the COVID-19 pandemic. If there is one category that most benefited from the pandemic, it’s cybercriminals. That’s why cybercrime has shot up by almost 300% since the start of the pandemic1 and that’s why you should consider necessary measures to protect your business from malicious cyber players. One of these measures is to have Cyber Liability Insurance (CLI).
Cyber Liability Insurance (CLI) covers the financial loss that results from cyber events such as data breaches. However, cyber liability is not typically included within general liability insurance and must be purchased separately. Also, each company offering a policy has different coverage options available and exclusions included.
Why Invest in Cyber Liability Insurance?
Experts estimate that the damage inflicted by cybercrimes will add up to about $6 trillion globally in 2021.2 That’s higher than the GDP of the world’s third-largest economy, Japan, which sits at $5.38 trillion.
These statistics stress why SMBs in particular should consider cyber liability insurance:
- Over 40% of cyberattacks target small businesses.3
- Over 60% of SMBs have experienced a cyberattack in the past 12 months.4
- Over 45% of SMBs say that their processes are ineffective at mitigating attacks.4
Having cyber liability insurance could be the difference between your business sinking or staying afloat after a security incident. Without cyber liability insurance, the various expenses you might have to bear after an incident could financially harm your business in the short term or, in the worst case, result in permanent closure.
Here are a few expenses that a business would have to manage following a severe data breach incident:
- Cost of downtime
- Cost of investigation
- Cost of recovering data
- Cost of legal procedures
- Cost of notifying stakeholders about the incident
- Cost of restoring the personal identities of those affected
Good cyber liability insurance would usually cover these expenses. But always remember that before you commit to a policy, you must get clarity from your insurer about what they do and do not cover.
Does your business need it? Any organization with cyber exposure must consider having cyber liability insurance. However, if your business handles or stores sensitive information online, such as electronic protected health information (ePHI) or personally identifiable information (PII), cyber liability insurance is much more important.
If you take out cyber liability insurance, make sure it has the following essential coverages:
- Network security and privacy liability
Covers breach response costs like forensic investigations, public relations, credit monitoring, legal fees and fines/penalties
- Business interruption losses and extra expenses
Covers lost revenue and added costs to continue business
- Digital data recovery and cyber extortion expenses
Covers losses such as ransom paid due to ransomware
- Cyber liability
Covers claims of lawsuit expenses resulting from breaches in client systems or networks
- Media liability
Covers claims of libel, copyright/trademark infringement, etc., resulting from media use
- Covers losses from digital theft of money or securities and social engineering fraud
Who Are the Top Cyber Liability Insurance Carriers?
Finding the right cyber liability insurance provider is not easy. While most general insurance providers offer general liability coverage, they don’t always offer comprehensive cyber liability coverage. It is always ideal to choose an insurance provider rated ‘A’ or higher by the most reputable insurance rating agency.
The following insurance carriers are worth considering (based on the requirements above; SpotLink has no direct workings with these companies):
- AXA XL
- AmTrust Financial
But remember, just committing to a policy is not enough. You must be sure you answered any questionnaires accurately, or your claim can be denied or reduced. You will also have to track/measure your compliance with the policy and its requirements to make sure your contract is always valid, and will therefore, pay out in the event of an issue.
Having the right partner by your side simplifies this process.
Whether you are looking to find a cyber liability insurance policy that is right for your business or trying to find and measure your policy’s compliance with cyber liability insurance contracts, we are here to help.
If you are considering a cyber liability policy, please contact us and we can help you find the right cyber liability insurance policy for your company.
- Cybersecurity Ventures
- Cost of Cybercrime Study
- State of Cybersecurity Report
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