Why Cyber Liability Claims Are So Costly

You have probably heard or read about something like this in the news- a large company is hacked, leading to a major data breach. For example, not too long ago, big box store Target was the victim of a hacker, and thousands of customers had their sensitive information exposed. Fortunately for big companies like Target, they are large enough to survive a cyber liability lawsuit. Unfortunately, many small businesses aren’t so lucky. In fact, more than 60% of small businesses go under within 6 months of a cyberattack. Cyber liability breaches (and claims) come with expensive legal settlements and large fines, not to mention damage to your reputation and brand. It is important to have the right cyber liability insurance policy, because recovering from a cyber security breach can drain your business’s time and money. 

How Much Can Cyber Claims Cost Your Business? 

a hundred dollar bill on fire, burning.
A data breach can cost your business thousands, even millions of dollars.

Data breaches can cost your business an enormous amount of money. There is a lot you need to do in the case of breach, which all adds up. You have to notify all of your customers whose information was affected as soon as possible (as required by state law). You must also investigate and correct the breach, which can cost a lot of money, and take months or even years. A study from the IBM/Ponemon Institute found that data breaches cost businesses $242 per stolen record on average. That means the average U.S. data breach costs more than $8 million.

The reason cyber liability claims cost so much is that they include the costs of:

  • Finding and repairing the cause of the breach– Hiring an expert can cost anywhere from $200 to $2,000 per hour.
  • Notifying customers– Contacting the affected parties can cost anywhere from $1 to $5 per notice.
  • Credit monitoring for affected customers for two to three years– This can cost anywhere from $10 to $30 per individual, and needs to continue for at least 2 years. 
  • Fines or penalties
  • Client’s financial losses if you are sued– The average cost for legal defense is $740,000, while the average legal settlement is about $2 million.
  • Defense costs and legal fees

What Cyber Liability Insurance Covers

While some small business owners might think that cyber liability insurance is only necessary for big companies, this couldn’t be further from the truth. Any business, no matter the size, can be hacked, and a network failure or breach can end up costing you hundreds of thousands of dollars. Any business that operates online and handles sensitive information needs cyber liability insurance. For example, if customers  use credit cards to pay for your services on your site, then you are at risk of a breach.

Cyber insurance provides protection for your business from financial losses as well as the cost of data loss to your customers. It covers:

a woman holding up a tablet with a red screen and the word ransomware on it

  • Cyber Extortion– If a hacker accesses your database and is holding it for ransom, cyber liability insurance will help recover those losses. 
  • Forensic Support– Your policy will cover investigation-related expenses and consultation fees. 
  • Legal Fees– Cyber liability insurance helps pay for legal help and advice when dealing with a lawsuit brought by clients or staff.
  • Business Interruption– A data breach affects your day-to-day operations, which leads to additional losses of income and revenue. Cyber liability can help cover these losses.

Different Cyber Liability Insurance

There are two kinds of cyber liability coverage:

  • First-party cyber liability insurance covers costs from a cyberattack or data breach on your own network or systems.
  • Third-party cyber liability insurance protects businesses from lawsuits related to a cyber incident that affects a client.a blue lock on a screen with green coding around it

Cyber liability insurance might seem pricey, but when considering the cost of cyber liability claims, it is a necessary expense. If you are worried about the cost, remember that there are many different plans that can be tailored to your specific business and needs. You can choose how much coverage you need and how much you can afford to spend. Most business owners add first-party cyber liability insurance coverage to their general liability policy, so you might be able to get a deal if you bundle your policies.

If you are interested in cyber liability insurance, and do not know where to start or what type of coverage you need, EZ can help. EZ.Insure understands just how important it is to protect customer’s information. We will provide you with an agent to help you find the right plan to fully cover you and protect your customers’ privacy. Your agent will compare quotes from all plans available in your area, and find the best plan at the best price. Even having the best cybersecurity does not completely eliminate the risk of a data breach, so it is best to protect your business with insurance. To get instant free quotes, simply enter your zip code in the bar above, or to speak directly to an agent, call 888-615-4893.

What Does a Pandemic Have to Do with Cyber Liability Insurance?

No matter what kind of business you run, cybercrime is always a threat. But there are some very scary statistics surrounding cybercrime attacks in regards to small businesses: according to the 2018 Verizon Data Breach Investigations Report, 58% of cyber attack victims were small businesses. Not only that, but studies show that 60% of small businesses who needed to suspend operations after a cyberattack were never able to reopen. 

You may be thinking that cyber security isn’t top of your list of priorities right now, but you could be making a very costly mistake. The recent focus on keeping businesses running while also keeping employees safe has actually meant a rise in cyber crime. 

Working from Home

caucasian woman sitting at a table with laptop in front of her
Nearly 35% of people who were working pre-COVID19 were working from home by April.

Face masks, social distancing, toilet paper shortages, everyone has felt the effects of the recent pandemic. One of the biggest changes to many people’s lives has been the switch from working in an office environment to working from home. In fact, according to an MIT study from early April, nearly 35% of people who were working pre-COVID19 were working from home by April. Add that to the roughly 15% of people who were already working from home and you have, by some estimates, close to 50% of the workforce working from home. 

Time will tell whether working from home is here to stay, or whether we will all eventually head back to the office. While there are many who are skeptical that we will become a fully work-from-home economy, there are many who believe that the way we work is forever changed. According to Patricia Strach, interim executive director at the Rockefeller Institute, “this forced work-from-home experience is showing us that work-from-home arrangements are a viable strategy for many businesses and that this is likely to be true even after the crisis is over.”

The Risks

While there are many advantages to working from home, there are also drawbacks. One major disadvantage is that more employees working from home seems to equal a big rise in cyberattacks. One type of attack that is on the rise seems to be directly related to the recent pandemic: phishing expeditions. Businesses have reported receiving a huge amount of phishing emails, which are used to implant malware in a computer that can give hackers an opportunity to demand a ransom or steal data. The phishing links that employees most often clicked on were ones that claimed to be information about the coronavirus. Cybercriminals have been taking advantage of people’s hunger for information on the virus to gain access to business’ data. According to Marc Rogers, head of security at the long-running hacking conference Def Con and a vice president at security company Okta Inc., “I’ve never seen this volume of phishing. I am literally seeing phishing messages in every language known to man.” cartoon os a person in all black with phishing pole tryingo to hook onto a businessman in front of a laptop

So many employees logging in from so many locations also poses a big problem. Without a strong virtual private network (VPN), or if employees are using public networks, then every time someone logs on they are exposing data to hackers. 

Workers are also more likely to click on links or visit websites they wouldn’t normally visit in the office. Not only that, they are all downloading legitimate software like Zoom for meetings – and each time they do so, a cybercriminal has a chance to hack into a company’s computer systems and steal data and passwords. According to Darren McGraw, president of Mechelsen Private Client, “all of a sudden, [so] many employees are scattering and connecting from different directions. So this creates a great deal of opportunity for cyber criminals to jump in where maybe the business hasn’t had a chance to control.

Protecting Your Business

laptops, tablets, and phones all in a circle being used by people, with padlocks all around.
“Firms that will do the best if they’re hit with a cyber attack are the firms that have a robust cybersecurity plan in place.”

It is unfortunate that there are people out there who will take advantage of a crisis to try and make a quick (and illegal!) buck. But it is something that you and your business need to be prepared for. The first line of defense, is, of course, prevention. According to Lisa Lindsay, executive director of Private Risk Management Association, “Firms that will do the best if they’re hit with a cyber attack are the firms that have a robust cybersecurity plan in place that is continually vetted, reviewed and practiced so that employees know the standard operating procedure. If they believe that a breach has occurred or that they may have been infected, they know exactly who to call and what to do in a timely fashion.” In other words, be prepared.

But, as we have seen, unusual times such as we’ve experienced recently often mean that criminals will change their tactics or become more sophisticated. It is important to have the right insurance to protect you in case the worst does happen, because your general liability insurance excludes cybercrime. In these cases, you will need cyber liability insurance, which can cover damages to your customers as well as damages to your business. 

You don’t need to go it alone when it comes to finding the right cyber liability insurance for your business. EZ.Insure is here to help, and will connect you to your own knowledgeable agent. With one of our agents, you never have to wonder if you’re going to get the right protection at the right price. To get started with us – for free – simply enter your zip code in the bar above, or you can speak to an agent by calling 888-615-4893.