A Guide to Cyber Liability Insurance
As cyber threats continue to become more frequent and sophisticated, businesses of all sizes are facing increasing challenges in safeguarding their assets, employees, and clients. In 2020 alone, the cyber security industry exceeded $145 billion in revenue with forecasts reaching $10.5 trillion by 2025. These sobering numbers illustrate the massive threats posed by cyber crimes, such as phishing, malware, supply chain attacks, and more.
What’s more, according to the National Cybersecurity Alliance, recent surveys found that “57% of SMBs believe they won’t be targeted by online criminals” but small businesses are “three times more likely to be targeted by cybercriminals than larger companies.”
Did You Know?
In a 2022 IT Compliance Benchmark Report, 63% of respondents reported that they experienced a data breach. 44% of companies that reported a data breach experienced a loss between $1M and $5M.
Source: Hyperproof
At Doeren Mayhew Insurance Group, we arm our clients with cyber insurance ahead of being forced to address the complexities that come with these crimes. We take a comprehensive approach in helping to protect organizations that are vulnerable to cyber attacks. These include businesses that store large volumes of personal data, depend on technology to successfully operate, or need to be in compliance with data security provisions.
What is Cyber Liability Insurance Coverage?
In the digital age, businesses are increasingly relying on technology to run their operations. However, this reliance also means that businesses are exposed to a growing number of digital risks, from cyber attacks and data breaches to system failures and social engineering. Cyber liability insurance is designed to help businesses protect themselves from these risks by providing coverage for costs associated with responding to and mitigating the impact of a cyber event.
Cyber insurance is a type of commercial liability insurance that covers financial losses caused by cyber threats. While it doesn’t cover things like costs associated with system upgrades, decreased valuation, and future financial losses, it can cover other areas of risk, including those outlined below.
Types of Cyber Insurance Coverage
Breach Response & Remediation
This coverage pays for the costs of responding to a data breach or cyber attack, such as hiring a forensics expert to investigate the breach, notifying affected customers, and providing credit monitoring services.
Ransomware, Cyber Extortion & Payment Provision
This coverage pays the ransom demands of cyber criminals if a business’s data is encrypted and held hostage. Payment provision coverage is also available which would pay the ransom, without requiring the business to fund the payment.
Cyber Business Interruption
This coverage provides financial compensation for lost income if a business is forced to shut down temporarily due to a cyber event.
Dependent Business Interruption
This coverage provides financial compensation for lost income if a business’s supply chain is disrupted by a cyber event, affecting one or more of its suppliers.
System Failure
This coverage pays for the costs of restoring a business’s computer systems and data after a failure, such as a software bug or hardware malfunction.
Dependent System Failure
This coverage pays for the costs of restoring a business’s computer systems and data if the failure was caused by a supplier’s systems.
Cyber Crime
This coverage pays for the costs of responding to cyber crime, such as fraud committed using the business’s computers or data.
Digital Asset Damage
This coverage pays for the costs of restoring or replacing digital assets that are damaged or destroyed as a result of a cyber attack or system failure.
Privacy Liability
If confidential or private data is governed by a regulatory agent, privacy liability insurance will help cover compensation requests in the event that information is stolen. These third-party expenses may come out of contractual liabilities or regulatory assessments.
Invoice Manipulation
This coverage pays for the costs of responding to invoice manipulation, such as when a cyber criminal alters an invoice to divert funds to their own account.
Social Engineering
This coverage pays for the costs of responding to social engineering attacks, such as phishing scams or vishing (voice phishing) attacks.
Client Funds
This coverage pays for the costs of restoring client funds that are stolen or misappropriated as a result of a cyber event.
Telephone Hacking
This coverage pays for the costs of responding to telephone hacking, such as when a cyber criminal gains access to a business’s telephone system and uses it for malicious purposes.
Errors & Omissions (E&O)
This coverage provides protection when a business faces allegations of negligence or breach of contract when a cyber attack disrupts regular operations. Albeit temporary, this type of service interruption could lead to costly claims that can be mitigated with E&O coverage.
Breach Response (Outside the Limit)
This coverage provides additional funds for breach response and remediation if the costs exceed the coverage limit of the main policy.
Reputational Harm
This coverage pays for the costs of restoring a business’s reputation if it is harmed as a result of a cyber event.
It’s important to note that not all cyber liability insurance policies offer the same coverage, and the specific coverage options available can vary depending on the insurance carrier and policy. Businesses should carefully review their policy to understand the coverage they have and consider purchasing additional coverage, if necessary.
How Much Does Cyber Liability Insurance Cost?
These commercial policies are typically scaled to meet a business’ unique needs. The cost of a business’s cyber liability insurance premium is determined by a number of factors, including:
- Size & Type of Business: Larger businesses and those in high-risk industries, such as healthcare or finance, may have higher premiums due to the increased risk of cyber events.
- Industry Regulations: Some industries have specific regulations that require businesses to carry a certain amount of cyber liability insurance, which can impact the premium.
- Past Claims Experience: A business with a history of cyber events or previous cyber insurance claims may have a higher premium.
- Cybersecurity Measures: The level of cybersecurity measures a business has in place can impact the premium. A business with strong cybersecurity controls may have a lower premium.
- Geographical Location: The geographical location of a business can also impact premiums, as certain regions may have a higher risk of cyber events.
- Amount of Coverage: The amount of coverage a business chooses will directly impact the premium. Similar to other insurance coverage, more coverage generally means a higher premium.
- Deductible:
The deductible a business chooses will also directly impact the premium. Similar to other coverage, a higher deductible generally means a lower premium amount
It’s important for businesses to carefully consider these factors when purchasing cyber liability insurance, and to work with a trusted insurance broker or agent to determine the best coverage for their unique needs.
How We Can Help
Whether you’re a small business or a Fortune 500 company, cyber liability insurance can protect your organization against financial risks in the event of a data breach or other cyber attack. Limiting risk by securing this type of insurance coverage is an integral part of your company’s broader data security model.
At Doeren Mayhew Insurance Group, we provide the time-tested guidance in securing the right insurance coverage to protect your business. Schedule a consultation with one of our trusted agents to discuss your unique cyber liability insurance needs today.
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Doeren Mayhew" is the brand name under which Doeren Mayhew Assurance and Doeren Mayhew Advisors, LLC and its subsidiary entities provide professional services. Doeren Mayhew Assurance and Doeren Mayhew Advisors, LLC (and its subsidiary entities) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards. Doeren Mayhew Assurance is a licensed independent CPA firm that provides attest services to its clients, and Doeren Mayhew Advisors, LLC and its subsidiary entities provide tax and business consulting services to their clients. Doeren Mayhew Advisors, LLC, Doeren Mayhew Insurance Group and its subsidiary entities are not licensed CPA firms.