According to a 2016 research study performed by the Ponemon Institute, the average total organizational cost of a data breach in America was a whopping $7.01 million. The same study also reveals that the cost of data breaches is the highest in the US as well as Germany. This cost includes the cost of hiring forensic experts to investigate the incident, identity theft and credit monitoring, customer loss resulting from turnover, poor client acquisition rates and more. Data breaches disrupt regular business operations. Their financial consequences are so severe that they can take any business to the cleaners. Interestingly, the cost of a data breach varies from industry to industry. Healthcare organizations, financial firms, and manufacturers pay the highest for each lost or stolen record. Although companies are making an effort to shore up their defenses, cyber criminals are employing highly sophisticated techniques for their own gain, and they’re increasingly targeting companies that store vast amounts of client data.
Impact of Data Breaches on Insurance Agencies
Back in 2015, Anthem, one of the industry’s largest health insurance companies, became the victim of a high-profile cyber attack that put the records of over 80 million customers at risk. The financial losses that resulted from this attack were enormous. Once hackers gain access to a company’s system, they steal personal information like customer names, addresses, employment information, and Social Security Numbers. The stolen information is either sold on the black market or used as a tool for other malicious activity. The fact is that cybercrime is a real threat to businesses of all sizes and insurance agencies are equally vulnerable.
In the aftermath of an attack, companies are thrown into a state of chaos. They have to scramble to put up new firewalls, identify vulnerabilities that caused the data breach, and work hard to remediate the issue. They also have to involve law-enforcement officers, legal advisors, and a crisis management team to address regulatory concerns. It’s not easy to recover from a data breach. Most companies report a drop in sales and a high customer loss following a highly sophisticated incident.
All agencies are vulnerable to cyber security breaches, regardless of their size, location, and specialties. They can, however, take a few measures to protect themselves and their clients from malicious attacks. Firstly, insurance agency staff at all levels need to understand and recognize the risks they face. They need to use an added layer of security to protect their most sensitive material. Secondly, they need to mitigate risks by purchasing cyber liability insurance.
An Overview of Cyber Liability Insurance
Cyber liability insurance helps you better manage the risks associated with a data breach and significantly reduces the cost that can result from a breach. While cyber liability insurance doesn’t protect you from any cyber-attack, it does make sure your business has the necessary revenue to cover the cost of an attack. With the necessary funds in place, you’ll be able to recover from a data breach faster, without running into huge losses.
What Cyber Liability Insurance Typically Covers:
- Notification costs
- Credit Monitoring Costs
- Cost of defending claims by state regulators
- The cost of losses resulting from identity theft
- Fines and penalties
- Liabilities arising from business interruption
- Extortion related expenses
- Costs associated with data loss of third-party suppliers
- Remedial system engineering
General liability insurance doesn’t cover you for losses associated with cybercrime, but a comprehensive cyber liability insurance policy does. The policies can also be tailored to suit each business. If you’re an insurance agency that stores private and confidential client information, you need cyber liability insurance to ensure your future financial security. Talk to the cyber liability insurance experts to find out how you can protect your online environment from data security issues that cripple thousands of organizations every year.
All information provided in this blog is for informational purposes only. The sources used are presumed accurate. CITA Insurance Services, Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc. will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use and will not assume responsibility for any misguided information. No guarantees are implied.