How to Know If Your Organization Needs Cyber Liability Insurance

How to Know If Your Organization Needs Cyber Liability Insurance

The cost of data breaches has continued to increase across the world despite improvements in cybersecurity. Among industry leaders, the average cost of a typical data breach has reached $3.9 million USD worldwide, with the average breach involving the loss of around 25,500 records (approximately $150 per record).

Due to this increase, cyber liability insurance, an insurance product which protects businesses against the financial risks of cyber attacks, has become a hot topic among large enterprises and even medium to small businesses.

Large enterprises may be able to recover from a large data breach, however smaller businesses could be forced into insolvency by a small attack. As a result, more and more organizations are considering adding cyber liability insurance to their risk management strategy. Here are 5 important factors to help determine if cyber liability insurance is right for your organization.

Highly Targeted Industries

Cyber crime impacts consumers and organizations across the board, but certain industries are targeted more often than others.

Businesses in the retail, consumer service, and financial service industries are frequently targeted for data theft. Cyber criminals stealing transaction data, financial accounts, and employee records, continue to cause substantial financial losses in these industries.

The healthcare and insurance industries are also a big target for cyber criminals looking to steal personal information. Government agencies on the local, provincial, and national level are attacked for similar reasons.

By analyzing the prevailing cyber incident patterns within their industry, organizations can reasonably assess the likelihood that they will be attacked in the future. Cyber insurance can be an important tool to mitigate risk for these industries because even a strong security plan will likely fail at times if constantly tested.

High Value Customer and Company Data

The probability of an organization being attacked increases with the value of its data. Customer financial data, employee records, confidential client information, proprietary data and trade secrets are all possible high value targets for a data breach. Financial data is used for credit card and other types of financial fraud. Employee records are used for tax fraud and other identity scams. Client and proprietary business data are targeted for government and industrial espionage.

Organizations with high value data should assess the risks of a data breach and consider using cyber liability insurance to mitigate those risks.

Outside Access to the Network

Organizations that allow users to access the internal network from outside the network are more vulnerable to cyber attacks. Strong internet and network security can reduce the risk of a breach, however even the strongest security plan can be breached if attackers gain access to unprotected computers or devices used by outside users. As an example Target was breached when cyber attackers stole account credentials by compromising the computer of one of their vendors. This eventually led to a breach involving the theft of credit and debit card information for millions of their customers.

If an organization allows access to sensitive data from outside the network, cyber liability insurance should be considered to protect against the costs of a devastating breach.

Lower Security Budget

The need for cyber liability insurance depends mainly on the strength of existing security investments. Organizations with considerable investments in their cybersecurity plan, including adding a cybersecurity executive to their upper management, are less likely to suffer a costly incident. The risk is not completely eliminated; however their security and cultural measures can make it much more difficult for cyber criminals to breach their network or succeed in defrauding their employees.

For organizations with high exposure to cyber attacks who have a lower investment in cybersecurity, cyber liability insurance can help mitigate their risks. Cyber insurance can also be useful while a business is implementing stronger security measures. The time required to improve security represents a window of high risk, and cyber liability insurance can provide a safety net. For businesses with less exposure to cyber threats, a cyber insurance plan can still be useful in mitigating the risks of a devastating breach, similar to fire and flood insurance for environmental disasters.

Financial Stability

Organizations considering cyber liability insurance need to assess the potential costs of a cyber attack. Those costs can include long-term damage to the brand, interruption of business operations, or the loss of business partners.

If those costs are large enough to damage the financial stability of the organization, cyber insurance can be extremely important to business sustainability. It won’t be able to repair intangible assets like a company’s brand, but it can allow a company to survive the financial damage and provide time for recovery.

Cyber Risk Assessment

After evaluating the above factors, if it’s determined that cyber liability insurance may be needed by the organization, the next step is to decide on the type of cyber insurance needed and the amount of coverage to purchase. The best way to do that is by conducting a cyber risk assessment.

Cyber risks are complex and require a comprehensive assessment of an organization’s network, data assets, and employee practices. Outsource IT can help in this regard. We have extensive experience assessing the cyber risks for business of varying sizes and industries. Contact an account manager at Outsource IT for more information.

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