Can You Earn More With
Cyber Liability Insurance?
TLTR: This blog discusses cyber liability insurance, types of cybercrimes, coverage, and the costs of the policy.
According to the Washington Post, estimated global losses from cybercrimes touched almost $1 trillion in 2020. The article further elucidates the association between coronavirus and how the work from home culture has made businesses an easy target for hackers.
While many companies are gearing up for more secure digital platforms, businesses should also consider investing in cyber insurance, also known as cyber liability insurance, during such unprecedented times.
In this blog
- What is Cyber Liability Insurance?
- Common Cyber Risks
- What Does Commercial Cyber Liability Insurance Cover?
- Personal Vs. Commercial Cyber Liability Insurance
- What’s The Difference?
- What Is the Cost of Cyber Liability Insurance?
- Companies To Purchase Cyber Liability Insurance From
- Top Commercial Auto Insurance Companies
- Last Words…
What is Cyber Liability Insurance?
Cyber liability insurance financially covers businesses in cases of cyber-crimes such as data breaches or ransomware. The coverage is especially important for businesses that record Personally Identifiable Information (PII) of their clients and employees.
A cyber-attack is dangerous for businesses. It threatens the business’s livelihood as well as dramatically increases expenses. Cyber liability insurance can help businesses if they become victims of cybercrime by providing coverage for financial losses caused due to the incident.
Research conducted by Accenture states that many organizations still have a gap in balancing cybersecurity. The study, conducted on 254 companies from seven different countries, stated that the average time required to resolve a malicious cyber-attack could take up to 50 days on average. It’s indeed safe to say that cyber insurance for small businesses has become a necessity.
Including a cyber liability insurance policy within your business owners policy (BOP) or even purchasing the coverage as a standalone policy would be a smart choice for business owners.
Common Cyber Risks
There is a common misconception that cyber-attacks generally are targeted at larger businesses. This is not true. According to Infosecurity, 23% of small businesses suffered at least one cybercrime in the last year alone. Small businesses are slowly starting to fall under a high-risk category for cyber-crimes.
Here are some of the most common cyber risks which might be covered by cyber liability insurance.
Phishing is an attempt to harbor sensitive information from the victim while posing as a genuine or trustworthy contact. The fake ‘trustworthy’ contact, in this case, could be a bank or an online service or even someone you work with.
Hacking is certainly one of the most popular cyber-crimes of all time. In this instance, the perpetrator will hack into the business’s database and steal sensitive information. The stolen information is later sold to competitors or used to access the financial assets of the victims.
Ransomware is a form of extortion and malware (malicious software) that encrypts (locks) your data and then asks for a ransom for you to access it. Most of the ransomware attempts are pulled off via emails.
In this category, a person could fall victim to scammers who appear to be selling products. While these companies are usually based online and look genuine, they’re not. The victim generally pays for a product they want to purchase only to find out later that the company was a front for scammers.
Companies which have a mid to a big number of employees may be a victim of this crime. Sometimes an employee may (accidentally or maliciously) leak sensitive information. The potential damage which can be caused due to the act should not be underestimated.
According to the Federal Bureau of Investigation, the top three crimes reported by victims in 2020 were phishing scams, non-payment/non-delivery scams, and extortion.
What Does Commercial Cyber Liability Insurance Cover?
There are two types of coverages within cyber liability insurance: first-party coverage and third-party coverage. For instance, if an online delivery company is attacked, then first-party coverage will help cover direct losses from the breach. On the other hand, third-party coverage will help the company cover legal defenses and settlement costs.
While many companies include a BOP, workers compensation insurance, and commercial general liability insurance (CGL insurance), they don’t have a standardized cyber liability insurance policy because of the increasing digitization.
In the aftermath of a cyber-attack, a company bears the burden of identifying the extent of the damages caused and notifying everyone who may have become a potential victim. The process requires a formal internal investigation as well. A cyber liability insurance policy will cover the expenses of the notification process.
Cyber liability insurance will help the business financially cover the data they lose because of a cyber-crime. Typically, the policy cover data loss, recovery, as well as recreation. Please check with your insurance provider to know the full extent of your policy.
If your company is completely digital, then a cyber-attack can cause your business to come to a halt. While standard business interruption insurance covers for such instances, they seldom cover for digital errors. A cyber liability insurance policy will help you recover some percent of the lost revenue due to a breach.
If your business is attacked via ransomware, then a cyber liability policy will help you pay the ransom. However, the policy may have a limit; check with your insurance provider to see how much.
Cyber-attacks can cost hundreds of thousands of dollars to even small businesses in the name of lawsuits. A comprehensive cyber liability insurance policy can certainly help you pay for lawsuits in such situations.
Cyber-attacks tend to target financial resources such as credit/debit cards and bank accounts. If a business faces security breaches in a client or employee’s PII, then cyber liability insurance covers credit monitoring. This practice is most common in tracking stolen cards and hacked accounts. Through credit monitoring, the victim gets notified for up to a year of the cyber-attack.
After a big security breach, a business is likely to struggle on all fronts. While a lot of money is spent in countering the effects of a cyber-attack, even more time and resources are spent on gaining the clients’ trust back. Cyber liability insurance can help you handle potential loss of business by covering the damages caused for a certain amount of time. Some insurance companies also include a PR payment clause in the policy.
Note: Your business may already have errors and omissions insurance coverage which covers some technological errors as well. While the protection is essential for businesses, it won’t provide comprehensive coverage in case of cyber liability.
Personal Vs. Commercial Cyber
Most cyber liability insurance policies are made for commercial setups. But what about your personal digital life? While cyber liability insurance may not be what you need for protecting yourself, you could use standard cyber security insurance.
What’s The Difference?
While a cyber liability insurance policy is great for businesses, it might be a bit too much for an individual. So, investing in a cyber security insurance policy would be the better option. Additionally, it’s not unheard of for start-ups and small businesses opting for cyber security insurance.
Start-ups and small businesses generally have a smaller client base. Although, as mentioned above, we do see a trend of increase in cyber-crimes against small businesses. A cyber security insurance policy would provide adequate coverage.
Note: It’s recommended that you opt for cyber security insurance only if you have a handful number of employees and are within the first five years of starting your business.
What Is the Cost of Cyber Liability Insurance?
The average cost of the premium for cyber liability insurance for $1 million coverage falls between $1400 – $1500 per year. The rates may vary depending on how much your deductible amount is and which insurance company you choose.
Here are some factors which determine the cost of cyber liability insurance:
Your premium cost will increase if your coverage limits are increased. For instance, if you want a $6 million coverage for your business, your premium cost will be around $50,000. Similarly, if you decide to lower your coverage limit to $3 million, your premium cost will be $25,000.
Cyber liability insurance policy costs are heavily influenced by the kind of data your company has access to. The more PII you have, the higher your premium rates are going to be.
Additionally, the number of people who have access to sensitive information also changes the premium cost. For instance, if you have freelance IT employees, your premium cost may be higher than full-time IT employees.
The insurance company may check your security system before offering a quote for cyber liability insurance. Storing sensitive information on an unsecured network will increase your risk for cyber threats.
Some professions are more likely to face cyber threats than others. According to CDNetworks these industries are certainly most vulnerable to cyber-attacks:
- Small Businesses
- Healthcare Institutions
- Government Agencies
- Energy Companies
- Higher Education Institutes
If your line of work is in any of these categories, then your insurance company may charge you a higher premium rate.
If you have made claims on cyber insurance in the past, you can expect your premiums to rise when purchasing cyber liability insurance. Moreover, a business with past claims is considered a high-risk client.
If your business has insurance policies such as BOP, E&O, or even commercial general liability, then your cyber liability insurance cost may be reduced. Some companies even let you bundle insurance policies at a cheaper rate.
Companies To Purchase Cyber Liability Insurance From
|Insurance Company||Best Feature|
|Chubb||Wide range of comprehensive policies which you can pick from.|
|Liberty Mutual||It offers the option to include cyber liability insurance in BOP for small businesses.|
|CNA||One of the largest commercial property and casualty insurers in the country.|
|Travelers||Offers cyber liability policy to owners along with pre-breach services. It also includes specialized coverage based on the business’s needs.|
|AIG||The company also includes preventable coverage in their policy.|
However, most insurance companies don’t provide their quotes online. In other words, you will have to get in touch with them to know the prices of policies you want to purchase.
A study by Allianz states that claims worth over $650 million were filled between 2015 to 2020. Imagine if the insureds who filled these claims had been uninsured. As the rate of cybercrimes increases, many businesses have started adapting to cyber liability insurance. While most businesses still prefer paying as little as possible for insurance, even a small cyber-attack can potentially devastate them.
Investing in cyber liability insurance is necessary as well as a power move for your business. Read our insurance blogs to know more about the policy and its categories.
Frequently Asked Questions (FAQs)
Is Cyber Liability Insurance Mandatory?
No, purchasing any form of cyber insurance is not mandatory — yet. However, if you live in New York, it is mandatory under the cyber insurance risk framework to file a complaint to the local authorities if you have been the victim of a cybercrime.
What is Multimedia Liability Coverage (MLC)?
MLC is different than cyber liability insurance. It includes:
- Emotional Distress
- Invasion of the Right to Privacy
- Copyright And Other Forms of Intellectual Property Infringement
What does Cyber Extortion Coverage cover?
Is It Possible to Self-Insure Against Cyber Attacks?
Yes, it is possible to self-insure against cyber-attacks or cybercrimes. However, it is certainly not advisable. Self-insurance requires you to have a liquid pool of money, and if your business falls prey to large-scale attacks, then it may be almost impossible for you to pull through.
If you have more questions regarding cyber liability insurance, then leave us a comment below!
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