Cyber attacks are on the rise, up 600% as a result of the COVID-19 pandemic and with a predicted trend of increasing frequency and severity. All types of businesses are vulnerable to cyber crime, with damages to worldwide industry projected at $6 trillion annually in 2021. Businesses around the globe are collectively investing trillions of dollars in cybersecurity frameworks, employee training, and cyber insurance to fight this worsening crime wave.
Types of Insurance Policies
Cyber and privacy insurance describes types of coverage that can protect against losses caused by a data breach or other form of cyber crime. These policies help companies to protect their assets and limit their liabilities in the event of a cyber attack. Companies of all sizes are investing in this insurance as a part of their comprehensive cyber protection plan, including the following types of coverage:
- Customer and employee data loss: this category relates to the investigation efforts required following a data breach and the resulting loss mitigation, including customers’ and employees’ data loss. Important areas of coverage include
- Crisis management expenses
- Forensic investigations
- Identity recovery services
- Loss of income
- Mental health counseling
- Public relations expenditures
- Regulatory fines
- Business interruption and extortion: using ransomware to disrupt operations and demand payments in exchange for releasing access to the company’s systems, extortion attacks have become more numerous during the fearful environment of the COVID-19 pandemic. This type of coverage includes
- Business losses and contingencies
- Data re-creation and restoration
- Failed system recovery
- Forensic accounting
- Ransom payments
- Payment fraud: using a number of tactics to trick individuals into divulging private information, this type of cybercrime can include
- Computer fraud
- Misdirected payment fraud
- telecommunications fraud
- Third-party liability: this provides coverage for liability in case lawsuits are filed by third-party victims, including these areas of coverage:
- Copyright infringement
- Electronic media liability
- Network security liability
- Privacy rights violations
- Unintended defamation
Costs of Cyber Insurance
Regardless of the type of policy purchased, the cost drivers will relate to certain characteristics of the insured business. In 2019, the average cost of a $1 million cyber insurance policy was $1,500 per year with a $10,000 deductible. To assist in understanding your insurance policy, here are the factors used to calculate those rates:
- Industry type: the business will be categorized by low, medium, or high risk based on the amount of sensitive data incurred in your field.
- Business size: the more employees on staff, the greater the company’s risk.
- Annual revenue: the more money the company generates, the bigger target it is for cyber crime.
- Security mitigation: lower premiums by establishing robust cyber security protocols.
- Policy terms: coverage limits and deductible will influence policy rates.
Cyber crime is on the rise and there is no sign of slowing. All businesses should invest in cyber insurance as one part of a multi-pronged approach to cyber security and risk mitigation.
About Cochrane and Company
For more than six decades, Cochrane & Company has been proudly at the forefront of the insurance industry. Our experience has enabled us to innovate in powerful ways, reimagining the E&S market, and providing technology solutions that make it easy to do business with us. Licensed in all 50 states, we proudly serve clients across the nation, providing personalized and powerful solutions to help you become an even better partner for your clients. Speak to one of our experienced professionals today by calling (509) 462-1148.