Cyber insurance protects businesses from information technology and internet-based risks such as data breaches or malicious cyberattacks. Such risks are often excluded from traditional property and casualty policies, or not specifically defined.

Cyber insurance often includes first-party coverage agreements for incident response costs, business interruption losses and extra expenses, digital data recovery costs, and network extortion demands; third party coverage protecting others’ data and systems; and additional benefits like cybercrime (e.g. social engineering and wire fraud).

If a company or organization leverages data, technology and connectivity to drive growth, cyber insurance is an important component to their business strategy. Every day the frequency and severity of data breaches increases, remote workforces and new endpoints expose vulnerabilities, cybercriminals grow more, and governments pass more rigorous privacy laws.

Business downtime, incident response, and legal fees or penalties due to a cyber incident can spell the end for a growing business. A cyber insurance policy can cover these risks and many more.

Cyber policies are typically triggered by either the loss of data or access to a network, or by a claim from a third party. Incidents that often result in a cyber insurance claim include, ransomware, social engineering and phishing attacks, employee, and insider threats.

Several factors can make it difficult for businesses to secure cyber insurance. Companies in high-risk industries, such as finance or healthcare, or those with a history of frequent cyber incidents may be seen as too risky by insurers. Insurers may also view a business as unprepared if its cybersecurity measures are inadequate or outdated, making it hard to qualify for coverage.

Additionally, if a business provides incomplete or inaccurate information during the application process, it can lead to denials or higher premiums. The ever-evolving nature of cyber threats further complicates risk assessment for insurers, often resulting in stricter underwriting standards and increased costs. A history of previous cyber incidents or claims can also be a barrier, as it signals a higher likelihood of future claims.

85% of data breach insurance claims come from small to medium-sized businesses, and more than 60% of those businesses never recover from a data breach. Regularly backing up your data is one way to minimize the damage that can occur if your business is compromised. If a computer is stolen or your network is infected with a virus, for example, the backups can enable your business to get back on its feet sooner. Talk to us. We can help.

Social engineering is an attack vector that relies heavily on human interaction and often involves a cybercriminal manipulating an employee into breaking normal security procedures and best practices to gain access to systems, networks or physical locations.

Ransomware is a type of malware that blocks access to a company’s data, sometimes with the threat of publishing it, unless a ransom is paid – often in the form of a cryptocurrency, making tracking and prosecution difficult.

• Forensic investigation of the breach
• Legal advice to determine your notification and regulatory obligations
• Costs to notify affected parties and provide credit monitoring service
• Credit monitoring expenses for affected parties
• Public relations expenses

First-party coverages commonly include incident response costs (for immediate triage and mitigation), business interruption and extra expense insurance (for lost revenue and additional costs), digital data recovery (to restore data records) and network extortion expenses (for ransomware payments, etc).

Third-party coverages commonly include cyber liability (for damages and regulatory penalties resulting from unauthorized access to or use of your network) and media liability (for claims of product disparagement, trade libel, copyright or trademark infringement and more from your use of media).

Endorsements expand the scope of your coverage. The following are just some of the value-added endorsements included in the base policy form:

• Coverage for a reputational event or customer attrition.
• Coverage for system failure resulting from events such as human error or programming error, or an infrastructure outage.
• Coverage for preventative shutdown (proactive business interruption coverage that allows for network shutdown to prevent the spread of a known computer virus affecting the insured or its industry).
• Coverage for the insured’s contractual partners.

The policy features coverage for Business Interruption and Contingent Business Interruption, and extra expenses for business continuity.

• Business Interruption : includes continuing normal operating and payroll expenses and a formulaic reimbursement of lost profit before income tax.
• Contingent Business Interruption : is the same as above but for damages resulting from a breach of a computer system operated by a third party for the benefit of, and under written contract with, the insured.
• Expenses : are expenses incurred to mitigate, reduce or avoid future cyber incident.

First-party liability coverage in the context of cyber insurance refers to the portion of an insurance policy that covers losses and expenses directly incurred by the insured organization as a result of a cyber incident or data breach. It provides protection against the costs associated with a company’s own response to an incident, including damage to its own data, operations, and systems.

Here’s a breakdown of what first-party liability coverage typically includes in cyber insurance:

Third-party liability coverage in the context of cyber insurance refers to the protection offered by an insurance policy for claims made by parties outside the insured organization (i.e., third parties) who are impacted by a cyber incident caused by the insured entity’s actions, negligence, or failure to adequately secure their systems or data.

While first-party coverage protects the insured organization from its own losses, third-party liability coverage addresses the legal responsibility the insured has when its cyber incident affects others. This coverage typically includes costs for legal defense, settlements, judgments, and damages arising from claims made by third parties.

In cyber insurance, first-party coverage focuses on protecting the policyholder against the immediate, tangible impacts of a cyber incident on their operations, while third-party coverage is concerned with legal liabilities stemming from the breach’s impact on others.