Cybersecurity Insurance Providers
Businesses today must exist online. Otherwise, they risk missing out on a broad customer segment. Indeed, companies need to thrive in the digital world. However, the digital world comes with its own set of risks.
The threat of cyberattacks is an ever-present one. Therefore, businesses must take the most appropriate action. Aside from proper cybersecurity measures, cybersecurity insurance is a key tool to protecting businesses.
In this article, we are going to explore how cybersecurity insurance can protect your business. But, most importantly, we are going to discuss how you can mitigate the effects of an unfortunate cyber-attack or data breach.
What Is Cybersecurity Insurance?
Cybersecurity insurance is a product that protects your business in case of a cyberattack. Cyberattacks include hacks, intrusions, data breaches, and ransomware strikes. As such, cybersecurity insurance helps your business mitigate these risks.
Any business that has an online presence needs cybersecurity insurance. In particular, companies handling customer information need cybersecurity coverage. In addition, please bear in mind that a cyberattack can be devastating for your business. Consequently, cybersecurity coverage is a must.
Cybersecurity insurance is essential as General Liability Insurance (GLI) rarely covers cyberattacks. GLI covers third-party liability such as accidents to customers on your business’s premises. However, GLI does not specifically cover damages derived from a cyberattack or data breach.
Insurers generally offer cybersecurity insurance as a standalone policy. In other words, you would need to purchase a separate cybersecurity policy. Nevertheless, some insurers can bundle cybersecurity insurance with GLI. This type of coverage would constitute an add-on to a new or existing policy.
A cybersecurity policy covers the following types of incidents:
· Data breaches
· Identity theft
· Extortion (ransomware)
· Denial of service
· Data destruction
Most importantly, cybersecurity insurance protects from the effects of cyberattacks. Here are the most common issues derived from a cyberattack:
· Defamation suits
· Liability claims
· Privacy violation
· Loss of digital property
· Monetary compensation
· Bodily injuries
Indeed, a cyberattack can lead to serious consequences. Therefore, all businesses need to be ready with a suitable policy.
A cybersecurity policy offers comprehensive coverage at a reasonable cost. Most standard cybersecurity policies cost around $500 a year. This premium provides a coverage limit of about $250,000 to $1 million, depending on the insurer.
However, you may need to pay a higher premium if your coverage limit is higher. For example, cybersecurity policies hovering around $3 to $5 million may cost anywhere from $1,000 to $5,000 annually.
In particular, you may score a better deal if you bundle your cybersecurity policy with others coverages. For instance, bundling cybersecurity with GLI can help you offset your premiums. Moreover, please bear in mind that your current cybersecurity practices also influence premiums.
Having great cybersecurity measures can reduce your premiums. Here are the most important factors to consider:
· Data access. In short, the fewer people in contact with your network, the better. For example, a third-party IT maintenance service may pose an increased risk. The in-house staff offers greater network security.
· Overall network security. Installing firewalls, antivirus software, and updated hardware.
· Turn of business. Businesses that collect and store customer data are especially vulnerable to attacks. Accountants, doctors, lawyers, or online stores need to be especially careful with their data security.
· History. Essentially, a clean claims record means a lower premium.
Generally speaking, businesses with better cybersecurity measures pay lower premiums for their coverage. As such, please take a look at your current practices. Update your firewall and antivirus software. Ensure that you have the best possible measures in place. These steps will help you get a better deal.
Cybersecurity Insurance Providers
Not all insurers offer cybersecurity coverage. After all, cybersecurity insurance is a relatively specialized type of insurance product. Consequently, smaller insurers don’t generally provide cybersecurity coverage. However, on the whole, larger insurance carriers offer appropriate cybersecurity policies.
For most businesses, cybersecurity coverage goes in $1 million increments. But, according to IBM, companies roughly spend about $4 million per data breach episode.
On average, small businesses spend about $36,000 on data breach-related expenses. Moreover, Kaspersky reports approximately $86,000 in costs related to data breaches.
As you can see, data breaches can become quite costly. In addition, of course, liability can increase if affected parties suffer damage. Therefore, cybersecurity insurance can provide the necessary coverage.
On the whole, businesses spend about $1,500 a year on cybersecurity insurance. For example, in Massachusetts, companies spend about $1,380. In contrast, corporations in Minnesota spend over $1,700 on the same coverage.
A standard $1 million policy may be insufficient based on your business’s operations. For example, a small business with less than ten employees may not need more than $1 million. However, large companies with hundreds of employees may need $10 to $15 million in coverage.
Nevertheless, individual professionals or sole proprietors may not need nearly as much coverage. A $250,000 policy would cost roughly $740 a year. A $500,000 policy would have an approximate annual cost of $1,150 annually.
Also, deductibles are roughly 1% of the total coverage amount. For example, a $1 million policy would have a $10,000 deductible. This deductible is the amount your business is responsible for in any incident. Some insurers may agree to a lower deductible. However, your premium would be higher.
Consider this situation:
Your business is an online retail shop. Customers input their information to process orders. As such, your servers store general customer information. Suddenly, cybercriminals hack your site and steal valuable customer information.
Fortunately, the breach did not result in any serious damage to your customers. Nevertheless, your business must recover from the data breach by improving cybersecurity measures. The recovery process is costly. Additionally, there are legal costs involved due to complaints from some customers.
At this point, your business uses its cybersecurity policy. Your business settles with affected customers. Your policy covers these settlements. Moreover, it covers the cost of improving cybersecurity measures.
In this example, a $1 million policy may be insufficient to cover all expenses associated with the data breach. Additionally, your business would need to furnish the deductible. In general, this would be approximately $10,000.
A good rule of thumb is to work with your existing broker. They can help you add cybersecurity coverage to your current GLI coverage. However, it also pays to shop around. You can look into purchasing a standalone cybersecurity policy. This approach makes sense, especially if you have a clean history.
In general, large insurers offer comprehensive policies bundled in one premium. Nevertheless, you can look into smaller, specialized insurers to find a solid standalone policy. In doing so, you can find the best deal based on the coverage amount your business needs.
Cybersecurity and Identity Theft Insurance
Identity theft is one of the most common issues with cyberattacks. Identity theft is a highly destructive crime. Cybercriminals steal personal information to impersonate regular people. These criminals then use the stolen identity to withdraw money from accounts, obtain loans, or commit fraud.
A data breach may lead to a loss of personal information. In addition, if the breach originates from your company’s servers, you could be liable for compensation. As such, your business needs protection against any possible attacks.
Specifically, businesses throughout the country rely on identity theft insurance to protect themselves. In 2015, the National Association of Insurance Commissioners (NAIC) reported an estimated market cap of $1.2 billion paid in cybersecurity premiums.
Cybersecurity premiums encompass a broad range of insurance coverages. Nevertheless, identity theft protection is among the most significant. Nonetheless, experts believe that cybersecurity premiums are much higher.
According to 2015 data, a total of 18.5 million cybersecurity policies were in effect. This figure clearly shows how cybersecurity is a serious matter. Moreover, a total of 17 million identity theft policies were in force in 2015.
Undoubtedly, businesses across the country take identity theft seriously. After all, a claim for damages related to identity theft can be extremely costly. As a result, companies must take the necessary steps to protect themselves.
On the whole, identity theft insurance is a small chunk of the overall insurance market. Nevertheless, it is a clear indication that businesses take identity theft seriously. So, should you. You must protect your business, especially if you handle sensitive customer information.
By 2019, the cybersecurity insurance market has ballooned to $3.15 billion, according to the NAIC. Additionally, cybercriminals attack small businesses every 11 seconds in America. This trend has led the insurance industry to issue a total of 19.9 million policies in 2019. That marks a significant jump from 2015.
Small businesses cannot afford to disregard cybersecurity coverage. So naturally, the premiums are an added cost to the bottom line. But with hackers targeting small, vulnerable businesses, there is no reason to forego identity theft coverage.
You can start by protecting your business with a $250,000 policy. In addition, your business can invest in fostering its cybersecurity measures. Boosting software, hardware, and staff training can go a long way toward avoiding data breaches.
Ultimately, insurance only protects you once a cyberattack is successful. Therefore, the best thing your business can do is to prevent attacks from happening. In doing so, you can skip dealing with data breaches and insurance claims.
Cybersecurity Insurance Regulations
It is worth noting that most states require businesses to possess some GLI. However, this type of coverage is relatively basic. Also, practically all states require corporations to include commercial auto insurance for their vehicles.
In contrast, the law does not specifically require cybersecurity insurance. Nevertheless, there are regulations businesses need to follow.
The National Institute of Standards and Technology (NIST) is a non-regulatory agency that provides guidance on cybersecurity measures in the United States. In addition, the NIST helps small businesses remain compliant with the main cybersecurity regulations in the US.
Particularly, the NIST helps small business protect themselves and their customer data. On the whole, regulations state that companies must make reasonable efforts to safeguard third-party data. However, these regulations vary from state to state. As such, it’s important to check your state’s specific laws.
In general, fines are the penalty for non-compliance. Fines can range from $5,000 to tens of thousands. Therefore, a data breach can lead to costly penalties. To help businesses comply, the NIST Small Business Cybersecurity Act became law in 2018.
This cybersecurity act looks to provide small businesses with the tools they need to remain compliant. Specifically, the legislation seems to help promote awareness, strategies, and resources for companies. The use of these tools is voluntary. Nevertheless, experts agree these tools are critical for cybersecurity in the United States.
Indeed, cybersecurity regulations are important for American businesses. According to some estimations, roughly 50% of small businesses in American have suffered some cyberattack. In other cases, some websites receive 50 attacks in a day.
As a result, the NIST provides a security framework for large and small businesses. Nevertheless, many corporations struggle to comply. Thus, companies need to find the means to comply with regulations.
It’s worth noting there is no “cybersecurity law” in the United States. Therefore, businesses must follow a series of individual regulations. For example, the federal Computer Fraud and Abuse Act (CFAA) serves as the primary legislation on cybercrime.
The CFAA outlaws the following practices:
1. Hacking (unauthorized access to information)
2. Denial of Service
3. Phishing (impersonation)
4. Infection (viruses and malware)
5. Identity theft
6. Electronic theft
Additionally, the Federal Trade Commission (FTC) requires companies to comply with specific cybersecurity regulations:
1. Companies must implement defensive measures as stated in the Cybersecurity Information Act (CISA). These measures include monitoring network traffic and data protection.
2. The Gramm-Leach-Bliley Act (GLBA) requires financial institutions to ensure privacy protection for their customers.
3. The Health Insurance Portability and Accountability Act (HIPAA) requires healthcare providers to ensure data protection for their clients and business partners.
Individual states may have particular regulations. For example, New York’s SHIELD act outlines cybersecurity measures businesses must follow.
Moreover, every state has specific guidelines for reporting cybercrimes. In particular, incidents such as data breaches, hacks, or intrusions need adequate reporting. For instance, Massachusetts has specific requirements for reporting incidents. Specifically, businesses must report the nature of the attack, responsible parties, actions taken, and any incident documentation.
Lastly, all 50 states have regulations requiring companies to notify their users of a data breach. As such, breach notifications must contain a description of the event and steps to take. Consequently, failure to report can lead to fines.
Please check your local state regulations to ensure full compliance. An external IT consultant can also help your company become compliant with all applicable laws.
Cybersecurity insurance is a must for businesses nowadays. Practically all companies have some online presence. Unfortunately, while necessary, this presence also makes them vulnerable. In consequence, purchasing cybersecurity coverage can help companies protect themselves.
Please bear in mind that GLI does not generally cover cybersecurity. As a result, purchasing additional coverage is necessary.
Purchasing cybersecurity coverage is a relatively straightforward process. You can get this coverage from your current insurer. Also, you can buy a standalone policy to supplement your existing coverage.
Some insurers bundle cybersecurity policies with GLI or a BOP. Nevertheless, you may need a larger standalone policy to supplement your current coverage.
Finally, it’s important to remain compliant with federal and state cybersecurity regulations. Compliance is crucial to ensure full protection. Thus, please ensure you have checked your local laws.
1. Cybersecurity insurance covers businesses in case of data breaches, hacks, or identity theft. In particular, it covers companies’ third-party liability. This coverage is important as General Liability Insurance does not often include cybersecurity coverage. In addition, cybersecurity policies cover legal fees, hardware and software replacement, and regulatory fines.
2. Most large insurers provide cybersecurity coverage. In addition, insurers often bundle cybersecurity coverage with general liability coverage. Also, you can purchase a standalone policy. Cybersecurity policies typically sell in $1 million increments. On average, businesses pay $1,500 annually for a $1 million policy.
3. Identity theft is the most common cybercrime in America. Cybersecurity insurance covers businesses in case of third-party identity theft. Without coverage, companies would be liable for compensating affected third parties.
4. There is no law requiring businesses to purchase cybersecurity coverage. Nevertheless, there are several federal and state regulations on cybersecurity. As a result, companies should consult their local laws to ensure they are compliant. Failure to comply can lead to fines and penalties. Additionally, cybersecurity coverage may not cover incidents if a company is blatantly non-compliant.
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