Private Companies Must Wake Up On Cyber Liability Insurance
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Cyber liability policies have been available in the insurance marketplace for nearly 10 years now. Yet insurance industry surveys indicate a majority of privately-owned companies aren’t purchasing this coverage. This is interesting when you consider the amount of media attention data breach events receive today. I’m sure most of us have received a notice indicating that some form of our private information has been compromised. Most recently, the holiday season data breach at Target included 40 million shopper’s credit card information being compromised; me included. Even with this attention, most privately-owned companies choose not to purchase the coverage. Why? Mostly, I’ve found there are 2 reasons the coverage is forgone.
First, executives don’t believe a data breach can happen to them. This always makes me think of the quote from former FBI Director Robert Mueller; “There are only two types of companies: those that have been hacked and those that will be”. It’s just becoming a normal course of e-business. Whether it’s your corporate web-site, company or employee use of social media, or the storing of customer confidential information, you have exposure to a data breach. Be aware, it’s more likely your data breach will be the result of human error rather than malicious criminal activity. While the criminal events get the attention of the media, you’re far more likely to have a data breach event caused by the loss of a laptop or smartphone, infringement of intellectual property on a website, or even a virus transmission.
Next, many private companies believe the costs related to this coverage is still too high. Cyber premiums are first determined by your business/industry. A company that operates as an e-commerce business or a data collection and storage company will be viewed as higher average risk. Regardless of your industry, there are basic risk management strategies you can execute to reduce your premiums.
- Use of strong password protection
- Conduct risk assessments for site vulnerabilities
- Have an incident response plan
- Leverage Firewalls, Anti-Virus and Anti-Spam tools.
Most insurance companies that provide a Cyber Liability product are willing to assist in your risk management efforts.
According to the Ponemon Institute the average cost of a cyber-breach is now $154 per customer record that is compromised. As the expenses of dealing with these breaches gets higher, it will be critical that private businesses have the insurance coverage to assist in covering, at a minimum, the state mandated notification costs. Beyond notification, most policies will cover the costs of a public relations firm to assist in repairing reputational damage. If you haven’t looked at Cyber Coverage lately I suggest it’s high time to consider again.
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