If you conduct business over the internet, it is your company’s obligation to protect the personal data and the financial information of your customers. This also includes information transmitted via email. A typical business insurance policy covers tangible assets. Electronic data is not considered tangible under the typical policy definition. You will most likely be held liable even if you use a third party company to host your website and store your data. You are also liable if your website and data are stored “in the cloud”.
A cyber liability policy is insurance coverage for liability that arises out of unauthorized use of or unauthorized access to electronic data or software within your New York network or business. Cyber liability policies also provide coverage for liability claims, computer theft, extortion or any unintentional mistake, omission or error made by your employee while performing their job. These are most often not covered under you general liability or errors and omission policies.
A large majority of small to medium sized business do not purchase cyber liability insurance, yet according to a recent study by the U.S. Secret Service and Verizon Communications, Inc., over 72 percent of all data breaches occur in small to medium sized businesses. Hackers often find it easier to invade the systems of these smaller companies because they do not always have the expensive firewalls and safeguards in place that larger companies can afford. Smaller New York businesses are often more at risk of major financial problems due to a cyber incident than a larger more diversified company that has more departments and assets and would be more likely to survive the loss and the costs involved. Large companies have risk management departments to help protect against these attacks.
A Trustwave 2013 Global Security Report states that 45% of date breaches occur within the retail industry and 24% in the food and beverage industry. Even though the financial services industry accounts for only 7% of attacks and healthcare for only 2%, the catastrophic expense of these breaches can put a company out of business. It is important to look at the whole picture and protect your New York company from these expensive and malicious attacks.
Many New York business owners discover significant gaps in their insurance coverage after a cyber attack. They may not have even known that cyber liability coverage exists. They then have to face the daunting task of getting the company back on its feet which is often very expensive.
A cyber liability policy will help to cover the following costs:
- The lost profits due to the business interruption and loss of clients
- The cost of notifying clients of the breach
- The cost of providing credit monitoring services to clients when financial data is stolen
- The cost of Forensic Investigators
- Legal expenses
- Regulatory fines and penalties
- A public relations firm to help repair the damage due to your company’s image
According to an article in Forbes Magazine, the average cost of a data breach is over five million dollars. This far outweighs the cost of the policy premiums if you are the victim of just one cyber attack. You can also take the following steps to reduce your risk of a data breach and conversely reduce your cyber liability premiums before you apply. An insurer will often work with you to get this done.
- Install a good firewall
- Install anti-virus and anti spam software on all systems and mobile devices
- Strong password protection that is encrypted and changed regularly
- Conduct regular risk assessments to reveal hardware and software vulnerability
- Create a written IT policy that defines account management and recovery plans
Cyber liability policies can be built around the needs of a business. An online retailer is going to have different exposures than a beauty salon with limited web presence. The size of your New York business, the number of customers and the type of on- line data you deal with will affect the cost of your premium. It is important to work with an independent insurance agent like Berkely Brokerage Corp., to insure that you get the best coverage at the best price. Cyber liability insurance is just as essential in protecting your business in today’s business environment as your fire and auto policies.