It seems that nowadays technology evolves at an alarming rate. As our use of computers and information technology expands, so too does its use in the business world. Businesses large and small rely more and more on technology to conduct everyday business - store information, automate transactions, marketing, and more. Computers have helped to increase productivity at a lower cost - less time, high quality.
However, the increased reliance on technology also puts businesses at risk of cyber threats such as loss of data and data breaches. This not only affects the company involved but any third party individuals such as clients and customers. The loss of theft of sensitive information can lead to lawsuits and damage to a company’s reputation.
You can protect your business, whether big or small, with cyber insurance.
What is Cyber Insurance
Cyber insurance is an insurance policy that specifically covers cyber risks.
Most general liability policies do not cover cyber risks, since data isn't considered a tangible piece of property. So, while your business property insurance will cover a physical computer, it will not cover any data-related damage caused by a cyber risk.
Cyber risks that are generally covered under a cyber insurance policy include:
- Loss or corruption of electronic data
- Computer viruses or malware
- Hackers and human error
- Data breaches
Any of these risks can be devastating to a business of any size. Even if you run a small business, loss of data or data breaches can spell a huge loss for your company.
Examples of Cyber Risks
To give you an idea of what cyber risks are, here are some examples of cyber damage a company may face and require insurance for:
- Outside and unwanted access to clients' names and contact information, employee information and other private information.
- A virus causes computer systems to fail, creating a business interruption.
- An employee causes an error that leads to the loss of important and sensitive information.
Cyber risks don't always involve hackers attempting to access or damage information. Cyber damages can occur in any different ways, as seen in the examples above.
Without proper coverage, businesses are financially responsible to repair these types of damages.
What Does Cyber Insurance Do?
Cyber insurance protects companies by providing 1st party and 3rd party coverages in the event that data is lost, stolen or corrupted.
1st Party Coverage
1st party coverage protects the company and its property. This includes loss or damage to electronic data as well as loss of income and extra expenses should the company experience an interruption to business due to cyber damage.
Additionally, cyber insurance policies will cover a business for cyber extortion should a hacker hold sensitive and important information hostage. 1st party coverage will also cover the costs of notifying customers and clients of data loss or breaches.
3rd Party Coverage
3rd party coverage covers issues dealing with those not included in the business entity such as clients, customers, vendors and anyone else who may be affected by a data loss or breach. This particular coverage is designed to protect a company should a 3rd party decide to sue for damages. The coverage will handle the costs of lawyers and settlements.
Just like with any other insurance policy, cyber insurance coverage depends on varying factors such as the nature of the industry, the services provided, the type of sensitive data and potential risks and exposures.
Who Needs Cyber Insurance
Any company that relies on information technology tools to run their business as well as protect data and intellectual property should have cyber insurance.
Even if your business is small, cyber insurance is important if you use computers to:
- Calculate sales projections
- Organize tax records
- Store 3rd party information (customers, employees, vendors, etc.)
Third parties, no matter the size of your business, can sue for damages and data breaches.
Small to mid-sized businesses are equally prone to cyber attacks, especially since hackers may assume that they may be more vulnerable.
The Benefits of Having Cyber Insurance
Cyber insurance coverage mitigates threats and financial loss as well as provides:
- Crisis Management. Cyber insurance helps to limit the negative impacts of cyber-related events on a business' reputation. It provides the means necessary to restore confidence in a company's cyber security.
- Compliance and Legislation. Cyber insurance ensures that your company follows the rules and laws regarding CASL (Canada’s Anti-Spam Legislation) in order to avoid corporate or personal liability.
- Cybersecurity Gaps. Oftentimes, cyber damages are caused by lack of education regarding cyber threats. Cyber insurance can help provide resources to help manage risk and identify preventable cybersecurity gaps.
Having cyber insurance not only helps your company in the event of a cyber risk but also works to help your business prevent threats and data loss.
Can You Risk a Cyber Threat?
You may think that data breaches or loss of information won’t happen to your business but everyone who uses information technology to run a business is at risk.
Before you lose precious information, or face costly legal issues, contact Arc Insurance Brokers for more information about cyber insurance.
We can walk you through the policy so that you are confident in having the exact coverage for your business needs.