Technology and the internet have offered organizations many ways to grow and scale their business, engage with customers, and hire top talent from anywhere in the world. The COVID-19 pandemic accelerated this for many organizations. While the internet offers many benefits, businesses growing use and reliance on it also leaves them vulnerable to cyber incidents that could have severely negative consequences on their business operations, finances, and reputation. It is vital that all businesses invest in Cyber Liability Insurance to mitigate the risk and protect their data and financial operations.
What is Cyber Liability Insurance?
Cyber Liability Insurance is a specialized, and often “stand-alone” coverage that helps protect against cyber security risks and offers coverage to businesses to help them recover from financial losses they may experience if they are victims of a cyber incident.
If your business experiences a data breach, ransomware attack, or other cyber-attack, there may be extremely high costs to recover. The consequences of a cyber-attack can be long-term, so Cyber Liability Insurance coverage also continues to be effective even after the initial attack. Not only do the expenses of recovery add up, but a business may have also experienced financial losses due to the time in which the business will be unable to operate as usual. Cyber Liability Insurance can help with the financial impact as your business begins to get back up on its feet.
What are the Consequences of a Cyber Attack or Breach?
A cyber attack can severely affect a business, even forcing it to shut down for a period of time. One of the biggest cyber threats is ransomware and the costs associated with that can be extremely high. Microsoft’s 2022 Digital Defense Report discovered that the global average cost of recovery from a ransomware incident more than doubled in 2021, with a $6.35 million estimated average cost of a data breach in Canada.
A cyber breach can also leave your business vulnerable to lawsuits or third-party claims if any personal client information is compromised during a breach.
Who Needs Cyber Liability Insurance?
Every business that uses technology to do business, no matter how big or small, needs to have a cyber insurance policy in place. Every business has an exposure and can become a victim of a breach or ransomware attack. Cyber-attacks impact more businesses than most people expect. Around one-fifth of Canadian businesses have reported being impacted by cybersecurity incidents.
If you run a small business, you may think you are less likely to be the victim of a cyber attack. However, businesses of all different sizes are targeted by hackers. This means even if you run a small business, if you handle or store any information electronically, your data is at risk. Statistics Canada states that small and medium-sized business account for almost half of all Canadian cyber security incidents.
The Coalition 2022 Cyber Claims Report, an analysis of recent cyber trends, found an increase in attacks on small businesses (up 40%), an increase in average ransom demand (to an average of $1.8 million per claim), and more cases of funds transfer fraud (up 18%).
Overall claims severity rose 56% for small organizations under $25M in revenue. The report also showed a significant increase in claims frequency, with a 40% increase in ransomware attacks and a 54% increase in funds transfer fraud attacks.
The above mentioned Microsoft’s 2022 Digital Defense Report reported that for the 41% of Canadian small businesses that suffered a cyber attack, it cost them at least $100,000, a 37% increase from 2019.
Having an adequate cyber insurance policy in place will allow your business to have a cyber insurance claim mitigated if it is the victim of a cyber incident. The business will have access to experts that will come in and handle the details, so it’s critical for every business.
What is Covered Under Cyber Insurance?
Regarding Cyber Liability Insurance, there are two main coverage types offered:
1. First-Party
First-party insurance is coverage for the immediate expenses that will be incurred by a business right after the cyber incident occurs. These expenses may include:
- Repairing damaged software and hardware, including computer replacement
- Fund Transfer Fraud
- Credit monitoring
- Service Fraud
- Digital Asset Restoration
- System Business Interruption & Extra Expenses
- Ransomware and Cyber Extortion
- The cost of notifying employees and customers of the event
- Protecting or rebuilding the business’ perceived reputation and trust through marketing and other means – this can include the cost of hiring lawyers, a computer expert, a public relations professional, or a forensic accountant.
- Financial losses due to extortion threats
2. Third-Party
Third-party coverage can help with costs that third parties, such as suppliers or customers may incur due to a cyber breach, as well as costs related to legal claims or lawsuits. Some of these costs could include:- Privacy lawsuits
- Liability claims related to copyright infringement or slander
- Negligence claims
- Network & Information Security Liability
- Regulatory Defense & Penalties
- Multimedia Content Liability
- PCI Fines & Assessments
- Bodily Injury & Property Damage - 3rd party
- Technology Errors & Omissions
How Much Does Cyber Liability Insurance Cost?
Cyber Liability Insurance costs will vary depending on the type of coverage you need for your business. It can range anywhere from $500 to $50,000 per year. The following factors will impact the cost of Cyber Liability Insurance:
1. Industry
The industry of your business can impact the cost of your Cyber Liability Insurance as this can heavily impact your business’s cyber habits. If your business operates solely online, you may be more susceptible to cyber risks and may need to have increased coverage that coincides with this increased risk. Certain industries will result in the information you store being more sensitive, which may also increase your risk, resulting in a higher premium price. These industries could include healthcare or accounting industries.
2. Security
By taking the proper security measures to decrease the risk of your business having a cyber-attack, your costs may decrease. These security measures can include firewalls, antivirus software, and frequent password changes.
3. Coverage
Your coverage type will directly impact how expensive your Cyber Liability Insurance policy will be. If your business requires more coverage because it has more many servers storing data or you would like to be covered for social engineering, this will impact the price you pay.
4. Data Access
The access to sensitive data you give to your employees can impact your insurance premiums. If you limit this access, you may be able to save money on your policy.
5. History of claims
Like most insurance policies, if you have a history with many claims, you may be considered a higher-risk client and this may increase the price your pay to be insured.
What Isn’t Covered Under Cyber Liability Insurance?
While Cyber Liability Insurance is a crucial way to protect your business, employees, and finances in an internet and data-driven world, it is important to understand what elements are not covered by your policy as every insurance plan has exclusions. Common exclusions to Cyber Liability Insurance may include all or most of the following:
- Bodily injury and property damage: This claim may be covered by a general liability policy rather than a cyber liability policy.
- Loss of property: If you lose an electronic device, this will not be filed under cyber liability insurance, but it is may be covered by your commercial property insurance policy.
- Criminal activity: Criminal activity that includes employee theft, robbery, fraud, and others is generally covered by commercial crime insurance rather than Cyber Liability Insurance.
- Social engineering: Social engineering is a method criminals use to trick their victims into sending money. This cybercrime is not always covered by Cyber Liability Insurance, but you may have the option to add this to your policy.
- War and terrorism
- Resulting loss of future revenue
- Errors and Omissions liability
- Valuation Loss
- Employment, discrimination, and directors & officers-related claims
It is also important to remember the specific stipulations your business agrees to regarding security measures when you purchase your Cyber Liability Insurance policy. If you have failed to conduct the agreed-upon security measures and a breach has occurred, you run the risk of being denied coverage for your claim. Contact your Ontario insurance broker to understand the specific details, limits, and exclusions of your Cyber Liability Insurance policy.
Our Youngs Insurance brokers are here to help significantly minimize your risk and mitigate costs due to cyber security and data breaches within your business by bringing you the best Cyber Liability Insurance coverage options for your business! Speak with your Youngs Insurance broker today, to ensure your business is protected.
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Disclaimer: The information provided on this blog is for educational purposes only and is not intended as professional insurance advice. The coverage, terms, and conditions of each insurance policy are unique and subject to individual circumstances. The information provided does not guarantee the availability or suitability of any insurance policy for your specific needs. You should not rely on the information in the blog as an alternative to professional advice from your insurance broker or insurance company. If you have any specific questions about any insurance matter, please consult a licensed insurance broker for personalized advice and guidance.