Data Breach Costs are on the Rise. Cyber Insurance Can Help.
Is cyber liability insurance worth it? This a question we hear every day as more and more businesses consider whether or not to purchase coverage. With data breaches on the rise every year, understanding the costs associated with a breach is important for understanding the importance of coverage. At ProWriters, we help you understand how much a data breach really costs, who it is most likely to affect, and what dedicated cyber insurance can offer.
Cost of a Data Breach
While the average global cost of a breach is $3.86 million, the damage to a particular company varies significantly depending on the size of the organization and the breach. Businesses both large and small are potential targets for a cyber attack; that said, understanding the cost of a data breach to small and medium-sized businesses (SMBs) is particularly important because they are often selected as preferred targets for cyber criminals. This is because cyber criminals view SMBs as less prepared and more vulnerable to a cyber attack. In fact, the National Cyber Security Alliance found that 70% of all cyber attacks target SMBs.
A study from Kaspersky Lab, a transnational cybersecurity corporation, breaks down the cost of cyber incidents to SMBs. The costs varied depending on the incident, with viruses and malware costing an average of $68,000 and targeted attacks costing $188,000. The study also identified other types of cyber incidents and the latent costs of a breach for SMBs:
- Loss of devices with sensitive data—$83,000
- Misuse of IT resources by employees—$79,000
- Loss of business—$21,000
- Hiring of external cyber experts—$21,000
Hiring cyber experts and losing business are costs that are incurred in addition to the immediate cost of a breach. These costs can continue to add up long after a breach occurs, and for companies without adequate cyber insurance, these costs have to be paid out of pocket.
When examining cyber incidents for large enterprises, the costs rise dramatically. The same Kaspersky Lab found that viruses and malware cost U.S enterprises $518,000 on average, while third-party breaches average more than $2 million in costs. Other cyber incidents and associated costs covered in the study include:
- Loss of devices with sensitive data—$2.8 million
- Loss of electronic data—$1.9 million
- Implementation of new software—$172,000
- Training of employees—$153,000
Third party exposure is a particular problem for businesses and enterprises. Transferring services to a third party does not transfer liability, and companies without cyber insurance often pay the price when one of their vendors is attacked.
Who Needs Cyber Insurance?
Any business that uses technology is vulnerable to a cyber attack. This includes:
- Accepting payments online or in-store credit card transactions
- Communicating with customers online or over VOIP phones
- Transferring documents electronically
- Storing personal information electronically
Even if a business doesn’t handle sensitive information, they are still at risk for a cyber attack. Especially in the case of SMBs, cyber criminals often don’t care what kind of information a company has. Motivated by financial gain, hackers can hold a network hostage or demand payment in exchange for restoring access to vital company records.
While a ransom payment can be significant, the lost revenue from cyber business interruption can be fatal, and the restoration of this electronic data can be time consuming and costly. It’s one of the reasons 60% of SMBs go out of business within six months of a cyber breach, according to the National Cyber Security Alliance.
What Cyber Insurance Provides
The premium for comprehensive cyber liability insurance is a small price to pay for broad and dedicated coverage that comes with a panel of experts ready to help the moment a breach occurs.
Cyber insurance today covers more than it ever has before. Competitive policies include preventative measures to protect businesses from a breach and incident response measures in the event a breach occurs. And cyber liability insurance often saves businesses more than they expect. An IBM-funded study from the Ponemon Institute identified several factors that reduce the average cost of a stolen record to businesses—$148—which are all included with a comprehensive cyber policy:
- Incident response team—$14 reduction
- Employee training—$9.30 reduction
- Security analytics—$6.90 reduction
Cyber insurance policies like the ones offered by ProWriters include access to all of the features above. Even just having cyber insurance coverage alone reduced the cost per record by nearly two dollars, according to the study. Cyber insurance goes a long way to ensuring a business can survive the financial costs of a data breach. In addition to the above items, ProWriters offers access to cyber policies that include coverage for:
- IT forensic costs
- Notification costs
- Credit protection costs
- Regulatory defense costs
- Fines and penalties
So, is cyber liability insurance worth it? The short answer is yes; the immediate costs of a data breach are significant, and the latent costs can be devastating. Cyber liability insurance offers several mitigation measures and high limits to cover the costs of a breach. ProWriters brings 20 years of expertise to this space and exceeds expectations when it comes to finding the right coverage for your clients. Speak to an expert from ProWriters today to learn what the right cyber policy can do.