3 Most Costly Types of Cyber Insurance Claims
A good cyber insurance policy starts with two core coverage components. These are:
- Data Breach coverage
- Cyber Liability coverage
Data Breach coverage is also referred to as 1st party coverage. This helps your business respond to a breach if PII (personally identifiable information) gets lost or stolen, whether it’s from a hacker breaking into your network, or an employee accidentally getting their laptop stolen at a coffee shop.
Data Breach insurance coverage can help pay the [expensive] costs for such things as:
- Notifying affected customers, patients, or employees;
- Hiring a public relations firm for damage control;
- Offering ongoing credit monitoring services to data breach victims;
- Business income coverage to help replace lost income if you can’t run your business because of a data breach;
- Extortion Coverage helps cover the amount you paid if someone takes your business’ data and demands a ransom.
Between data breach coverage and cyber liability coverage, more than 95% of cyber insurance claims costs come from data breach losses! And these data breach losses fall into three broad categories:
Theft of funds
This is the straightforward theft of money from a company’s bank account. The fact that nearly every business can now move its money around electronically and remotely means that it is much easier to steal. Instead of stealing physical funds, criminals are increasingly stealing electronic funds through social engineering scams. And if a business has somehow been negligent in allowing this to happen, their bank may not reimburse them.
Theft of data
Data is valuable, and if something has value, it is worth stealing. Identity theft has reached record levels around the world and in order to commit identity theft, criminals need data. Seemingly harmless information such as names and addresses stored on a computer network can be worth more money than you think
Damage to digital assets
In order to operate, businesses now have an incredibly high dependency on their systems, and criminals know that. By either damaging or threatening to damage a company’s digital assets, attackers know that they can extort money from their victims who might prefer to pay a ransom rather than see their business grind to a halt. And even after paying up, the victim is often left with systems that are unusable and costly to fix. Your cyber insurance policy will help do this too…..fix and patch your system.
So, when contemplating the purchase of a cyber insurance policy, data breach coverage (1st party coverage) is the heavyweight coverage you must incorporate into your policy. Cyber liability (3rd party coverage) is just as important, but that’s not where the bulk of the claim dollars are paid in the event of a data breach.
Regardless, make sure both of these coverages are included in your cyber insurance policy. And then drill down even further into the data breach coverage section to make sure the line item coverages such as Incident Response Expenses, Cyber Extortion Loss, Network Restoration Expenses, and Business Interruption are included as well.
No two carrier policies are the same and cyber insurance is absolutely not one size fits all!