Cyberliability insurance is becoming increasingly popular in dealing with data breach incidents. become We constantly hear about data breach incidents which make management scramble to deal with the consequences as quickly and adequately as possible especially when the incidents are publicized and the potential for law suit and loss of customers is high. Other than hiring skilled workers and empowering them with resources and adequate budgets, management should also think about the inevitable loss of data and protection from the consequences of data breach incidents with data breach insurance or cyber security insurance, however, the benefits are limited as you will find out.
Why Data Breach Incident is Inevitable?
A company can possess all the policies, procedures, tools, and resources but, it takes just one employee, one security weakness, or one vendor to mess everything up for a company because they don't implement and follow rules. Some data breach scenarios include employee collusion with others to steal company data, and, hacking cases which steal data remotely for ransom or extortion, and ideology.
Consequences of Data Breach Incidents
As you know, hacking can be devastating and even detrimental to the survival of a company. You probably heard of the latest incident at Ashley Madison in which case the hackers stole the data of their customers who were cheating on their spouses. After stealing the data which included customer names, contact info, and payment data among other detailed information, hackers asked the company to shut down the business which they refused and the CEO even suggested that the data was fake. Then hackers did the unthinkable and unleashed the stolen data on the Internet destroying thousands of families who discovered that their spouses, fathers and mothers were cheating. The impact of an incident on any company and its customers is hard to assess at first and company survival may be questionable.
Some people may favor hacking as it may be targeted against a company they hate especially when hacking seems to be revenge based or ideological as it may be in the case of Ashley Madison.
Data breach incidents are on the rise costing in average $6.5 per incident, and customers are increasingly seeking cyber security insurance from their companies while companies are seeking the same from their vendors. To be more specific, demand for cyberliability insurance is up 36% from last year and some expect the industry to double by next year and be around $10 billion by 2020.
Cyber insurance has been around since late 1990s but the sudden rise of the industry occurred when new and improved regulations such as data breach notification, HIPAA and GLBA laws and related government investigations started to put pressure on the companies.
Even though less than 20% of large companies and 6% of small to medium size companies have cyber security insurance policies, companies are under pressure by their customers to have adequate polices to protect themselves.
The cost of the average cyberliability insurance ranges from $3500 to hundreds of thousands of dollars depending on the size of the companies and other factors such as past data breach incidents.
Cyberliability Insurance Coverage
Cyber insurance policies may or may not cover some of the expenses. Some of the cost areas that companies might be interested in to be included in the policy for protection include the following:
Cyberliability insurance is becoming harder to secure and more expensive. Companies which have experienced data breach incidents n the past may find it specially harder to purchase a policy. Just like a bad driver must pay much more than a safe drive for an automobile insurance, companies with bad data protection reputation will have to pay higher premiums for insurance.
Cyberliability insurance may not prevent a company from going out of business or restore its lost image and credibility, but it can certainly put customers and regulators at ease while covering some of the data breach costs.
The damage caused by data breach incidents may be harder to reverse in some cases. That said, cyberliability insurance is only used to reduce the inflicted pain following a data breach and it certainly can not solve all the challenges that arise from a data breach.