What is Cyber Liability Insurance?
Cyber liability insurance coverage extends the coverage provided by traditional liability insurance from losses due to perils to losses due to non-physical perils. Cyber liability is a relatively new concept in the insurance industry that is often looked upon as a protection mechanism provided for only large corporations. However, cyber liability insurance is also available for small businesses. Data indicates that more than one-third of all cyber attacks are directed at small businesses with less than 250 employees. As such, protection against cyber breaches is particularly important for small companies.
Cyber attacks can impact businesses in ways that were unheard of just a few years ago. An effective cyber intrusion can shut down business processes and leave a business with no ability to complete transactions, accept payments or otherwise engage customers. Hacking and other vicious schemes can be used to access your data sources in an effort to acquire the names, addresses, social security numbers and other personally identifying information of your customers, suppliers and business partners. The Internet, mobile communication and cloud computing have advanced the reliance upon data as the primary source of effective commerce and communication. With global access, your data is vulnerable to hackers around the globe.
Many small businesses already incur the expense of general liability and employment liability insurance coverage, and they may be reluctant to incur the additional expense of cyber liability insurance. However, you may find that the cost of a breach far exceeds the cost of additional insurance coverage. In fact, you should seek to protect your business in 2014 with an affordable, integrated insurance coverage solution.
Protections Provided by Insurance
A cyber breach may shut down your computer system and traditional coverage will not provide coverage for your loss. Cyber liability insurance coverage protects you against loss if your data is breached, damaged or otherwise destroyed. Business interruption coverage keeps you in business if your system and network are compromised. This coverage will provide the funds necessary for breach disclosures, hiring a PR firm to protect your brand and to compensate you for sales losses should customers decide to switch to a competitor. Some policies also provide coverage that will satisfy any regulatory penalties and fines that may be imposed. You will need comprehensive data loss protection that includes the repair and restoration of data as well as protection against the loss of data processing hardware, such as computer systems and mobile devices. Your coverage should provide protection against the implementation of viruses, spyware and malware as well as losses due to company information leaks, defamatory statements, copyright infringement and stolen devices. You will need coverage that takes effect regardless of how the breach was caused.
For small businesses that don’t have an IT team readily available to meet their needs, some cyber liability insurance companies are willing to assist with providing protection against threats in an attempt to reduce the risk of filing a claim. An insurance company may assist in ensuring that a proper firewall is installed or assist with the development of company policies that are known to reduce risks.
Shifting Responsibilities for Breaches
Small and large businesses have a legal responsibility for protecting sensitive data and information. Even with outsourcing, where you have no control or authority over the entities that you outsource services to, you bear the responsibility for data that is hosted on your behalf. For example, when you outsource to cloud computing data providers, you have a legal responsibility for the security of the data that they host. Traditionally, credit card companies assumed much of the responsibility for data breaches, but that responsibility is being transferred to retailers. Merchant service agreements between credit card companies and retailers have clauses that make retailers responsible for the cost associated with breaches. These costs may include lawsuits filed by customers and suppliers, and they may range from thousands to hundreds of thousands of dollars for small retailers. Cyber liability insurance can protect you against such costs.