Cyber attacks are the high-tech crime of the century.

The aim of cyber thieves is usually to steal sensitive data stored on company servers. If your company saves customer’s personal data, you may need cyber liability insurance.

What is it and how does it work? Harrah & Associates, Inc. explains.

Cybercrime: A Million Dollar Industry

Cybercrime results in millions of dollars in losses to companies around the world. The losses are not only monetary, either. Data breaches can also damage a company’s reputation.

Here are some alarming statistics:

  • The average cost of a malware attack on a company is $2.4 million (Accenture: 2017 Cost of Cyber Crime Study)
  • The average cost of cybercrime increased over 27 percent globally in 2017 (Accenture)
  • Information (data) loss accounts for 43 percent of costs (Accenture)
  • The average cost of a data breach for companies with 50K+ compromised records is $6.3 million (Ponemon Institute: 2017 Cost of Data Breach Study)
  • Including turnover, increased customer acquisition, reputation losses and diminished goodwill, the global cost was $4.13 million. (Ponemon Institute)

Another type of attack involves cybercriminals taking over a network. First, they hack into a system and encrypt the data so the company cannot access it. Then they demand a “ransom” in order for the company to regain control.

Ransomware damage costs exceeded $5 billion in 2017, according to CSO Online.

Why All Businesses Need Cyber Liability Insurance

High-profile cases like the ones that affected Target and Equifax always make headlines. However, small and medium-sized businesses are also frequent targets. According to Forbes, 58 percent of cyber attacks affected small businesses.

So, if you think cyber thieves will leave you alone because you’re small potatoes… think again.

How Cyber Criminals Target Businesses

Cybercriminals are very sophisticated. They spend all their time thinking of ways to infiltrate vulnerable systems. In most cases, hacks occur because an employee opens the door.

Common methods of cyber thieves:

  • Drive-by downloads – In this case, thieves trick employees into clicking on websites with malicious content or plugins
  • Public-facing applications – Thieves target vulnerabilities related to SSH network services, web servers and file-sharing platforms
  • Phishing attachments – Introducing viruses via attachments embedded in emails
  • Phishing links – Emails that include links to malware or infected sites
  • Phishing services – Introducing threats via social media networks or personal email accounts

What do Cyber Thieves Want?

Cyber thieves often target “personal identifying information”, including:

  • Social security numbers
  • Bank account numbers
  • Credit card numbers
  • Passwords
  • Network access passcodes/identifiers

Cybercriminals then exploit the data in a variety of ways:

  • Steal identities
  • File for a social security number
  • Establish credit
  • Take out loans
  • Commit fraud under someone else’s name
  • Buy goods and services
  • Sell the information on the dark web

What is Cyber Liability Insurance?

General commercial liability protects your business from financial losses relating to property damage or injuries. It will cover you if you get sued and need help pay legal fees, court costs or judgments against you.

Cyber liability insurance protects you from hacks, data breaches, denial of service attacks and computer viruses.

If your data is stolen or compromised, you could face lawsuits from customers and clients. Government agencies and credit card networks might impose steep fines or penalties.

There are many other costs associated with cyberattacks, beyond lawsuits. You will have to spend time and money investigating the cause of the breach and take steps to ensure that such an event never happens again. This can entail installing more sophisticated security software and firewall protection.

You may also have to hire a computer consultant to recover your lost data, not to mention PR and advertising costs for damage control, both with your customers and in the media.

What Does Cyber Liability Insurance Cover?

Most cyber insurance includes first-party and third-party coverage. First-party coverage applies to direct losses to your company. Third-party coverage applies to claims made against your company.

First-party cyber insurance coverage:

  • Loss or damage to electronic data
  • Legal and police services to investigate how the breach occurred
  • Loss of income or extra expenses
  • Business interruption costs
  • Credit and fraud monitoring schemes
  • Cyber extortion losses (ransomware schemes)
  • Notification costs to affected customers, clients, vendors, and employees
  • Damage to your reputation
  • Public relations to restore faith in the business

Third-party cyber insurance coverage:

  • Settlements related to judgments or damages after a data breach
  • Coverage for employee privacy
  • Government fines and penalties
  • Errors and omissions
  • Cost of reissuing cards (for banks and other financial institutions)

Other types of cyber insurance coverage:

  • Hacker damage – Protects against attacks and covers the cost of recovery and repairs. It also covers PR fees for security and forensic consultants.
  • Multi-media liability – Applies to data shared via emails, social media and other online platforms.
  • Business interruption and income – This coverage helps you stay afloat while you are trying to recover from a cyber incident.

Who Needs Cyber Liability Insurance?

As discussed earlier, it is not only large corporations who need to worry about cyber attacks. Certain industries are frequent targets of cyber thieves.

Vulnerable industries include:

  • Financial institutions
  • Investment firms
  • Hospitals/medical clinics
  • Insurance companies
  • Retail stores

If you store identifying or sensitive information, consider buying cyber liability insurance. This applies to any company that collects and saves any of the following data:

  • Credit card numbers
  • Bank or payment information
  • Personal information: Names, email addresses, phone numbers, addresses, social security numbers, driver’s license numbers
  • Health and medical information
  • Trade secrets or patent applications of clients

Be sure to look into state and federal regulations. Certain states might require businesses to carry cyber liability insurance.

Protect Your Business with Cyber Liability Insurance

Now that you know the risks and results of cybercrime, it’s time to protect your business.

You never know when you might be the victim of a cyber attack. Don’t wait until after an incident to protect your business from financial ruin.

Protect yourself now with cyber liability insurance and any other commercial insurance you might need.