Cyber Crime Insurance – Law Firms
Why Cyber Crime Insurance Coverage is Critical
Cyber insurance is designed to protect a business when costs are incurred due to cybercrime. Business owners should note that common insurance policies such as commercial property, business income, and general liability often restrict—and in many cases exclude—cyber-related damage.
Business owners beware: You should be skeptical of enhancements to such common policies designed to address cyber exposure. These so-called “cyber enhancements” are often minimal and should not be relied upon without a thorough examination of an insurance professional.
How safe is private information when stored electronically?
You may not want to know the answer to that question. But if you’re just a bit curious, consider visiting privacyrights.org/data-breach.
The site allows you to scroll through a frequently updated chronological list of reported breaches of private data. Some data are lifted from large companies everyone’s heard of. What’s surprising is how many of the breaches occur at smaller organizations. The information on this site should prove that when it comes to personal data safety, businesses big and small must be on alert!
While it’s the large breaches that make headlines—think Citigroup or Bank of America—smaller businesses may be at a greater risk. They often lack the infrastructure and resources to protect from cybercriminals
What does cybercrime cost?
According to the Ponemon Institute’s First Annual Cost of Cyber Crime Study, a business can expect to pay an average of $204 per customer record lost or stolen.
Cyber Crime Defined
According to the Ponemon study, the list of cybercrimes is rapidly growing. While many are aware of common cybercrimes, such as identity theft, the list also includes other crimes that can cause damage to a business’s electronic infrastructure. Examples: theft of a business’s intellectual property, the creation/distribution of viruses and malicious code, and private data publishing in a public forum online.
Business owners may struggle to keep up with these often sophisticated threats. Such threats place a tremendous burden on business owners to prevent these losses. Many states have turned to legislation that requires business owners to spend money notifying consumers when a potential breach has occurred.
Protecting Your Firm
There are many insurance products available to help business owners deal with the cost of cybercrime. Policies may address both first and third-party losses.
What is a first-party loss?
This is a cost the business owners may absorb to cover the firm’s own expenses caused by cybercrime. Examples may include:
- Notification and credit monitoring for compromised individuals. (Most states currently have laws in place requiring the business to pay the cost of notifying all consumers that may be victimized by a breach. Most laws require these costs to be paid regardless of whether the consumer has suffered financial damages resulting from the breach.)
- Cost to restore data that has been stolen or damaged.
- Lost income resulting from downtime caused by a damaged network, lost information, or data breach.
How about a third-party loss?
When a cybercrime occurs against a business, other parties also could be impacted. A third-party loss describes costs that appear when others incur expenses that can be attributed to cybercrime. Examples may include:
- Defense costs.
- Judgments and settlements for lawsuits brought by customers, employees, and other third parties—such as a company claiming its network was damaged by a virus from another infected network.
- Costs associated with fines or penalties imposed by a regulatory body.
Final Note on Cyber Crime Insurance
If you’re a business owner, threats to your data come from a variety of sources. Whether you’re the victim of a random hack, disgruntled former or current employee, angry competitor, or anyone else, cyber crimes can cause serious damage to your business. Worse, if the crime results in a breach of private consumer data, state law may impose significant fines that could devastate your firm’s bottom line. For more information about insuring against these growing exposures, call your Trusted Choice® independent insurance agent today.