Digital transactions have become very popular in the business sector with an unfortunate side effect being an increase in the number of cyber attacks and data breaches. These cyber attacks can result in huge losses to an organization’s finances and brand, particularly when hackers gain access to pertinent information such as a firm’s client database or business structure. To help mitigate losses and protect firms in the event of cyber attacks, information assurance professionals should look into incorporating cyber liability insurance into their overall strategy.
Growing Relevance of Cyber Liability Insurance
Cyber liability insurance is considered a security policy that protects businesses and organizations in the event of a cyber attack or data breach. These cyber attacks can expose firms to various direct and indirect expenses, some of which can be covered if a firm has cyber liability insurance. Specifically, information assurance professionals that work for companies whose database contains critical information such as private financial records, customer emails, credit card information, and customer addresses should look to incorporate cyber liability insurance into their strategy as it can provide additional support against litigation. This form of protection is becoming more prominent, especially with major advancements in cyber hacking strategies which allow criminals to hack into databases that were previously deemed too sophisticated to hack. As the cyber security landscape continues to expand, information assurance professionals need to enhance their strategies to include more proactive preventative tactics along with protection for after a breach has occurred.
Why Data Breach Recovery is So Costly
When hackers obtain access to a firm’s database, they often become privy to critical information pertaining to the business’ operation. With such information, businesses are left exposed as the cyber criminal now has easy access to data, accounts, and can even tamper with business records. Recovering from a data breach can be quite expensive, as a recent IBM study found that the average cost of a single data breach was approximately $4 million in 2016. On top of expenses, data breaches may also potentially lead to:
- Business interruption
- Security overhaul expenses
- Possible closure
Information assurance professionals can leverage cyber liability insurance to help mitigate these potential negative outcomes, while also extending the reporting period for data breaches. For example, businesses typically have 90 days to report a potential cyber hack, yet firms may not always be able to detect data breaches within the designated time frame, resulting in hefty fines and bad publicity. By incorporating cyber liability insurance into their strategy, information assurance professionals can protect their firms from unknowingly breaking federal laws and damaging its brand and reputation.
What Cyber Liability Covers
As the level and volume of cyber attacks increase, the forms and policies involving cyber liability insurance evolve with it. Traditionally, cyber liability insurance was primarily for companies providing technology services, such as software consulting or network architecture, and did not always directly protect companies against security or privacy issues. The advancement of cyber attacks has led to a change in coverage as modern cyber liability insurance now covers data breaches, online media, extortion, and data recovery. It also can protect against security liability. Experts within the cyber security sector state that “it is no longer if a company experiences a cyber attack, but when”. Considering this, cyber security professionals can remain proactive by including cyber liability insurance in their overall cyber security strategy to add the legal and financial protection behind active, preventive measures.
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Cyber and Privacy Insurance, International Risk Management Institute
Cybersecurity, National Association of Insurance Commissioners
Cyber liability risks, Insurance Information Institute
What is cyber insurance and why you need it, CIO.com
2018 Cost of a Data Breach Study by Ponemon, IBM