What is Cyber Liability Insurance?
Cyber Liability Insurance is designed to protect companies against third party claims for liability and proprietary losses resulting from the company engaging in various electronic activities, the most common of which is collecting some kind of sensitive, personal, or confidential communication.
A Cyber policy covers a company when a data or network breach occurs in which the confidential customer information, such as Social Security or credit card numbers, is exposed/stolen by a hacker or other criminal who has gained access to the company’s electronic network. While coverage will vary, Cyber Liability Insurance will generally cover a variety of expenses associated with data breaches. Common expenses include notification costs, credit monitoring, costs to defend claims by state regulators, fines and penalties, and loss resulting from identity theft.
Keep in mind that Cyber Liability Insurance covers business interruption costs of a cyber security issue. When most companies experience a data breach, they are unable to operate normally until everything is fixed. A Cyber Liability policy will compensate for this loss of income (including your necessary operating expenses during this time).
There’s one other nuance to mention here. A typical data breach situation involves the failure of a general security feature or unauthorized access to an entire database. This means that thousands of users’ data will be compromised rather than a handful. It’s pretty easy to see how a breach of this nature opens your company up to more than just a simple lawsuit. More realistically, you’ll be looking at a class action suit (much more expensive!).
Why do I need it?
- According to the Identity Theft Resource Center, there were roughly 23 million confidential records exposed in 414+ reported security breaches in 2011 alone, amounting to a 44% year-over-year increase.
- The definition of “Personal Identification Information” is ever-expanding and now includes even simple information like email and addresses zip codes in certain states. It’s getting even easier to bring a class action lawsuit for cyber theft!
- Criminals are only responsible for a portion of these data breaches. According to a study done by the Ponemon Institute, almost two thirds of all data breaches were caused by mistakes! 35% can be attributed to negligence and 29% to system error.
- The same study determined that the average cost of a data breach lawsuit in 2012 was $5.4 million, or $188 per record exposed.
How do I protect my company and myself?
Want to read more on the subject? Check out our blog posts on Cyber Liability Insurance.
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