Data breaches and cyber-attacks happen more often than we would like them to. Plus, most of today’s businesses and companies handle online transactions or store sensitive electronic information from vendors, suppliers, and employees. Thus, preventing a data breach should be one of the top priorities for any business out there. This is why we should consider cyber insurance.
Making sure we follow appropriate procedures to protect our data should always be of great importance for a business. Also, purchasing antivirus software and keeping updated might not be enough; password managers, ransomware protection, and malware blocks are a must-have for any person or company that might store sensitive data and personally identifiable information on their computers and databases.
Since Cybersecurity Insurance will not protect us from being targeted and becoming victims of a hack or cyberattack, we will discuss what exactly is cyber liability insurance coverage (CLIC), what kind of situations are covered by it, and how to know if cyber insurance would the right move for us.
Technopedia defines Cyber Insurance as coverage for businesses and individuals, so they can recover from losses after a cyber-attack. These include indemnification against lawsuits, customer notification, and public relations handling if required. CLIC plans have been around since 2005, with growing popularity due to the rise of hackers targeting small businesses. Therefore, the market for cyber insurance is expected to be worth around $8 million dollars by the year 2020.
As a result of an increasing interest of businesses and individuals in liability coverage in case they were victims of a cyber-attack, exploring exactly what these insurance plans cover, and what they do not is crucial to understanding how we could benefit from this type of coverage.
There are two different types of cyber insurance coverage that we need to consider before deciding on purchasing a plan. First Party coverage and Third-Party coverage, which include coverage and mitigation for a wide variety of events.
First-party coverage plans mainly deal with compensation of expenses caused by loss or damage of data. These include the costs of recovering or reconstructing data, repairing or replacing equipment, and professional consultations. This also covers income that might have been lost, and even extra expenses required to maintain operations. If we were victims of cyber extortions, First Party coverage should also help us mitigate such costs. It should also cover costs regarding notify our clients or customers about the cyber-attack and repairing our reputation too.
Third-Party coverage, on the other hand, compensate the expenses required to deal with lawsuits and litigation. These could be the result of network security breaches and network privacy trials. Also, we might face litigation for failing to protect sensitive data stored on our database. Errors and Omissions, and Electronic Media Liability are also part of what a Third-Party coverage would include.
Despite the increasing demand for CLIC plans during the last five years, they are not absolutely necessary. One important aspect to consider before purchasing cyber insurance is having a cybersecurity risk assessment with a professional. This will help us to determine how vulnerable we really are. Another aspect to consider is to analyze the actions you or your business are taking to prevent being the victim of a hacker and prioritizing on software that will protect your network from a virus, malware, ransomware, and any other type of cyber threat.
If you have come to the conclusion that cyber insurance is an absolute need for your company, and there are no budget limitations that would jeopardize profitability, the best action to take is to look for an insurance broker and advisor that specializes in cyber-attacks. Since this is a relatively new product, and the specific details of what a security breach or loss of data are not really clear to some insurance companies, the support of a specialist in the matter will be of great help when purchasing your cybersecurity coverage plan.