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Return To: Cyber Insurance – The Ultimate Guide
Your company faces risks of cybercrimes, no matter how small. There are many cyber crimes that your company may fall victim to, which don’t always involve losing a computer. You need financial protection to ensure your customers’ and your safety when cybercriminals attempt to infiltrate your systems.
You need to understand how cyber insurance can assist your business. So, we collected some common examples of cyber liability claims that cyber insurance can cover.
What Are Cyber Liability Insurance Claims?
- Identity Theft: IT incidents like cyber-attacks can lead to stolen identities. When cybercriminals hack into your company’s system, they can steal your clients’ private information like Social Security numbers. These criminals then use those details to make purchases and loans in your clients’ names.
Rogue employees are other cases of stolen identities. Former employees may take the company data they formerly had access to and then sell them to websites that create false identities. Expenses for damage and defense in such liability cases may reach a half-million to a million dollars.
- Data Privacy: Much like stealing identities, cybercriminals can break through your network security and digitally steal trade secrets, whether they are yours or a client’s. These hackers may then sell the files to a competitor. If a former employee in your company sold your trade secrets, you can sue them for invasion of privacy.
Customers can do the same to your company if a cybercriminal steals their trade secrets. Both cases can be expensive, which includes legal fees and customer rewards reaching up to half a million dollars.
- Physical File Compromise: If your company keeps physical copies of your confidential data, you risk compromise if you don’t properly dispose of them. Suppose you toss old papers which contain checking account information or Social Security numbers. Outsiders then get access to this private data and publish them without consent.
If you run a health facility, these leaked documents are a violation of the Health Insurance Portability and Accountability Act (HIPAA). The government issues HIPAA breach penalties that reach up to $50,000 per violation.
- System Recovery: Recovering lost data can be an expensive process. You may lose data when you or an employee loses a company laptop that contains important information. You could also lose data when your company network gets infected with a destructive computer virus. Expenses come from computer system repairs or replacements, which can reach up to $5,000.
You risk losing income while your system undergoes repairs and maintenance. Many cyber insurance policies include coverage for lost income while your business remains non-operational.
- Regulatory Fines: Protecting your consumers’ data is a state-mandated responsibility. Failure to meet compliance requirements in protecting your customers’ private data risks facing substantial government penalties.
Data breaches are avoidable, and your consumers may sue you for bad data breach response measures. The IBM (International Business Machines) reported an average cost of $3.86 million in data breaches in 2020.
- Notification Expenses: If your business loses data, you must pay for notifying your customers about the data breach. North Carolina state laws require you to notify people of security breaches that may compromise their personal identifying information. In July 2019, at least 6,500 data breaches affected 16 million consumers in North Carolina.
The office of North Carolina Attorney General Josh Stein listed the following inclusions that you must notify consumers about, should you experience a security breach:
- Details of the security breach incident
- Type of personal information compromised
- Details of your efforts to avoid further illegal access to your client’s personal information
- Existing hotline numbers that people can call for assistance
- Advice for affected individuals
- Contact information for the major consumer reporting agencies:
- Federal Trade Commission
- North Carolina Attorney General’s office
Cyber Insurance Coverage Types
Insurance companies offer cyber insurance policies to protect your business from the fines that you risk facing. Insurers offer two types of cyber liability insurance: first-party cyber insurance and third-party cyber insurance.
First-Party Liability Coverages
This type of cyber liability insurance covers the expenses for the risks that directly affect your business.
| Coverage | Pays For |
| Bodily Injury and Property Damage Liability | Bodily or property damage that occurs due to a cyber-attack. Sometimes criminals take company data by brute force which may leave some people hurt in the process. |
| Pollution | Damages to systems that may compromise the environment. This policy is important for businesses in the environmental sector whose operations involve water pipes or hazardous materials. |
| Computer Replacement | Your hardware that suffers severe impact from malware. You will need a new device when a cyber-attack leaves your computer irreparable, or when a thief steals your company computer. |
| Fund Transfer Fraud | Your financial losses in the event of a security or social engineering failure. Cybercriminals can intercept money transfers that your unsecured network may conduct, causing you to lose money to fraudsters. |
| Service Fraud | Fake charges from companies that bill you for activities that a hacker conducted. Telephone service providers or cloud service providers may charge you for extra expenses when a hacker uses their services with your name. |
| Digital Asset Restoration | Expenses for replacing, restoring, and recreating the data you lose in the event of a breach. You will need to retrieve your digital assets that get damaged when your security measures fail. |
| Business Interruption | Lost income while your company undergoes security maintenance. When your company’s security measures fail, you risk financial losses when you undergo data restoration. This process interrupts your business operations, which require extra expenses to bring your system back online. |
| Cyber Extortion | Money that digital extortionists demand from your company when they hold your data hostage. When cybercriminals succeed in stealing data, they usually demand money in exchange for not leaking your information. |
| Data Breach Response (Crisis Management, Public Relations, and Reputation Repair) | Expenses to pacify a data breach. Data breach incidents require you to inform everyone involved in your company’s operations of the data breach. Parties involved include your employees, your customers, and government agencies like the Attorney General’s Consumer Protection Division. |
Third-Party Liability Coverages
This type of cyber liability insurance protects your company from expenses that you face when your clients hold you liable for failure to protect their data.
| Coverage | Pays For |
| Bodily Injury and Property Damage Liability | Expenses needed to heal injuries or repair property damage that results from security failures on your end. |
| Network and Information Security Liability | Legal fees you face when you fail to protect your clients’ personally identifiable information. Customers can take legal action when your company falls victim to a cyber-attack, compromising their identity and sensitive financial information. |
| Regulatory Defense and Penalties | Government charges when you fail to protect consumer data. North Carolina laws will penalize you for your poor cyber defense measures that result in compromised consumer information. |
| Multimedia Content Liability | Expenses that result from wrongful acts related to multimedia, including piracy, defamation, and copyright infringement. |
| PCI Fines and Assessments | Privacy violation fees that the Payment Card Industry Data Security Standard (PCI DSS) charges you for. |
| Technology Errors and Omissions | Damages and defense initiatives for your company when your services result in data loss. |
Conclusion
Cyber liability insurance claims are the instances that cyber liability insurance can cover. Most of these claims involve data loss, which results in expensive recovery expenses and legal fees. You need the proper financial protection for your business, especially if you manage sensitive consumer data.