While there is no accepted standard among all insurance providers, you will find many common areas of coverage in most cyber and privacy insurance policies. Reviewing these categories is a great way to improve awareness and prepare for purchasing or updating your own policy.
Cyber and privacy insurance is a rapidly growing industry that’s expected to reach a market size of over $20 billion by 2025. One significant driver of this growth is a growing awareness among businesses and individuals regarding potential cyber risks. Another major factor is an increase in the number and severity of attacks over time. This post will explore the four major categories of cyber and privacy insurance and what they cover. Businesses of all sizes can benefit from a cyber and privacy insurance policy that is well matched to the organization’s cybersecurity needs.
The Definition of Cyber and Privacy Insurance
The term “cyber and privacy insurance” is used to describe forms of coverage that can be used to protect against potential losses caused by an event such as a data breach or cybercrime. These policies are created as a means for companies to limit their liabilities and protect their assets in the event of a data breach. Cyber and privacy insurance has become a popular choice for small businesses (SMBs) and companies of all sizes in recent years as awareness of cyber risks continues to grow.
- Customer & Employee Data Loss
The first category of cyber and privacy insurance is customer and employee data loss. Many companies these days need to manage large amounts of sensitive information that is unfortunately also the target of many cybercrimes. Sensitive data, such as personal identifying information (PII), can also be lost or compromised during a data breach that did not take place with criminal intent. There are many important areas of coverage related to customer and employee data loss, including:
- Identity recovery services
- Crisis management expenses
- Loss of income and wages
- Regulatory fines and penalties
- Mental health counseling for employees or customers
- Forensic investigations
- Public relations expenses
These costs are all related to the mitigation and investigation efforts that are required in the event of a data breach or cybercrime. Depending on the size and scope of an operation, a breach can affect hundreds or even millions of customers or employees. Cyber and privacy insurance helps reduce the time, expense, and effort required to recover fully.
- Business Interruption and Extortion
The second category is related to extortion attacks that have become a popular choice for criminals during the COVID-19 pandemic. These incidents include the use of ransomware that can disrupt business operations and lead to demands for substantial payments in order to regain access to the company’s systems and data. Coverage related to these extortion-style attacks provides support for:
- Ransom payments
- Data recreation and restoration
- Business contingencies and loss
- System failure recovery
- Forensic accounting services
Given the highly targeted nature of cyber extortion crimes, insurance coverage seeks to provide specific coverage that can assist during recovery. Having support for loss of business income and ransom payments can dramatically affect the financial burden incurred in the aftermath of a cybercrime.
- Payment Fraud
Another category of cybercrime is payment fraud. These criminals use a variety of tactics to trick employees into sharing sensitive information or sending money directly to fraudulent accounts. This can also involve direct hacks into a system’s infrastructure for the purpose of stealing funds or installing malware. The first-party coverage related to payment fraud includes support for expenses related to three major events: telecommunications fraud, computer fraud, and misdirected payment fraud. Recovery of lost funds and assistance with managing telecommunications providers are two major benefits of this cyber insurance policy category.
- Third-Party Liability
The fourth and final category of cyber and privacy insurance is coverage for third-party liabilities. This can include expenses related to several different activities that need to happen if lawsuits are filed. Some examples of specific areas of coverage include:
- Trademark and copyright infringement
- Network security liability
- Electronic media liability
- Unintended defamation
- Violations of privacy rights
A cyber and privacy insurance policy can also provide support for public relations expenses that may be needed to contact affected individuals and manage media coverage to preserve or restore the company’s reputation.
Cyber and privacy insurance will only continue to evolve as technology and strategies improve to meet market needs. Understanding these four major areas of cyber insurance coverage can help you compare coverage among providers when pursuing a policy. There are several factors to consider when implementing a cybersecurity program, and cyber insurance remains an excellent resource for reducing risk and mitigating against potential cyberattacks and data breaches.
To learn more about how Cyber Insurance quotes and premiums work, check out our other blog post:
https://www.zeguro.com/blog/insurance-in-depth-cyber-insurance-quotes-comparisons
