Cyber insurance is a specialist package to protect businesses from computer-based risks, covering damage and loss caused by cybercrime. You may never have heard of cyber insurance, but if you own a business and have a computer it has now become essential. There is an attempted cyberattack in the UK every 1.3 seconds, according to Hiscox. That’s 45 a minute, and 65,000 a day.
The internet has opened businesses to the world creating vast opportunities, but it has major risks. Even experts in the world of computers can be vulnerable to hackers, phishers and fraudsters who could damage a business’s bottom line and reputation, throwing away years of hard work. A resulting systems failure could cause days or weeks of interrupted trade.
In fact, according to a recent Government survey, the cost of cybercrime to the average medium-sized business was £9,270 in 2019. This could be from a security or privacy breach, theft or business interruption. Cyber insurance provides financial protection and invaluable expert and legal assistance in case a business is negatively affected by cybercrime.
What does cyber liability insurance cover?
According to NimbleFins, cyber insurance primarily covers first party and third party liability, protecting against losses from business interruption, hacking, data and security breaches, viruses and other cybercrime. Not all cyber insurance packages are the same but here are the areas you should be looking out for.
First party cover includes direct costs to your business as a result of cybercrime, such as:
Business interruption: Where you lose income as an attack or breach has prevented you from trading.
Investigations: Helping to find the source of the cybercrime.
Managing an attack: Where legal experts advise on the regulations and processes to comply with the law.
Cyber extortion: If a ransom is ordered an insurer can give advice to escape the ransom and in some cases even meet the finance demand.
Recovering lost data or programmes: Insurers can fund experts to repair and restore the items lost.
Restoring computer systems: Covering the cost of experts to restore whole computer systems.
Notification costs: Covering the expense of notifying your customers or other third parties of a data breach.
Reputation management: For example funding a PR campaign or paying for free credit monitoring or credit protection services for affected customers.
Third party cover deals with losses to your customers or other third-parties affected by the cyberattack or system failure. It can cover legal costs and damages such as:
Privacy protection: If you have infringed on a customer’s right to privacy, for example, the GDPR law has been breached, this insurance will cover legal defence costs and settlements.
Media liability: If your third party has their privacy breached or has a claim of defamation from information published in the media, insurance can cover the cost of investigation, defence and damages.
Who needs cyber liability insurance?
If you use a computer system for your business you probably need cyber insurance. It is particularly important if your business deals with payment card information or stores sensitive customer information such as names, addresses, banking information or other personal data, which could see you easily in breach of GDPR laws or with hefty legal costs and damages to pay if there was a security lapse.
Other policies such as standalone business interruption insurance or commercial property insurance provide some of the coverage you would have with cyber insurance. But businesses which hold sensitive data and financial information are adding to their protection for wider safeguarding.
Business owners could be forced into paying ransoms costing tens of thousands of pounds or having to shell out for replacement hardware after an attack.
But even if your business does not fall into that category it is worth investing if you use a large number of computers in a private, internal network. Even a self-employed sole trader using just one laptop can be a victim of cybercrime.
Legal support following a cyber breach was the most common cyber insurance claim of 2020, according to a Government survey. Researchers found 73% of those who had made a claim needed legal assistance, while 68% had made a claim against lost earnings or profits, and 67% against loss of data.
How much is cyber insurance?
Cyber insurance can cost as little as £132 a year (£11 a month) for a very basic package for a small business, but many SMEs pay around £240 a year for a good cyber insurance policy. Larger businesses will pay more, again depending on their size and trade.
As with every policy, this depends on many factors, including the size of your business and the risk factors involved in your line of work.
It is always worth looking around for several quotes and be sure to look at exactly what they cover as not all policies offer the same protection.