Table of Contents
- What is cyber liability insurance?
- Do I need cyber liability insurance for my Florida business?
- What are the risks of cyber crime?
What is cyber liability insurance?
I own a small business in Florida. The news is saturated with stories about companies being sued after a cyber breach and how devastating the costs are if you’re the victim of this kind of crime. What is cyber liability insurance and how can it help my business? How do I know if I need cyber liability insurance for my Florida business? What are the cyber risks that I face as a Florida business owner?
Storing, using, and transmitting digital information are a vital part of day-to-day operations for most businesses. And while technology has opened up a whole new world of possibilities and productivity for all of us, it has also exposed your business to a whole new set of potential liability issues that can cost you time and money and can even shut down your business for good.
If you’re sued because of a data breach or another cybercrime that is inflicted upon your business, you’ll be responsible for paying legal fees, court-ordered judgments or settlements, and any other court-related costs. In addition, you will need to notify your customers of the breach, provide them with credit monitoring services free of charge, and perform all kinds of public relations activities to repair your image. Imagine the costs! Could your business survive?
As cyber threats have evolved, insurance companies have responded with a variety of insurance products that respond to the most common and costly cyber liability claims.
Cyber liability insurance is designed to protect your business assets by covering costs related to a cybercrime or a cyber breach. If you’re sued because the incident caused harm to others (customers, business partners, etc.), cyber liability insurance pays for your legal defense costs, as well as any settlements and judgments that you are ordered to pay. This is known as third-party coverage.
In addition, cyber liability insurance may provide coverage for your own costs, including the costs to repair IT systems, recover lost data, pay fines, and notify customers and other parties of the breach. You might also incur public relations costs and other related expenses in an attempt to salvage your reputation. This is known as first-party coverage.
You can add cyber liability coverage to a business owners policy or a Florida commercial general liability policy, or you can purchase a customized stand-alone policy that addresses the specific types of cyber exposures that you have.
Do I need cyber liability insurance for my Florida business?
Any business that handles electronic data — especially personally identifiable information about its customers — is susceptible to cyber threats. Data can be breached in many ways, from stolen laptops and other portable devices, to rogue employees, theft of digital assets, human error, and more.
Smaller businesses might be even more vulnerable to data breach and cyber threats than larger ones. Consider these factors that might make cyber protection even more vital:
- Do you handle sensitive customer credit or bank account information?
- Do you handle medical information, Social Security numbers, driver’s license numbers, or any other personally identifiable sensitive information about your customers?
- Could you be at risk for employee mistakes, unauthorized computer or network access, hackers, or stolen equipment?
In order to determine if cyber liability coverage is right for your business, you must weigh the risks you face along with the costs associated with them and decide if Florida business insurance coverage is the best way to help protect your assets. Here are some suggestions:
- Carefully assess your business and how you handle data. Determine how valuable and how vulnerable your data is, and what costs you might face if something happens to it. If absorbing the costs would wipe you out, cyber liability coverage is probably an important solution.
- If you decide that pursuing cyber liability coverage is the best plan, you will also need to prove that you are taking reasonable steps to protect your data. Even if you don’t pursue coverage, adding additional security systems and better training employees on how to handle sensitive data goes a long way toward mitigating your risks. It will also help to keep your premiums down.
Cyber insurance in its various forms can also give your clients or customers more confidence in your ability to handle the various types of cyber risks that are out there. Whatever you decide, be sure to work with a knowledgeable Florida independent insurance agent who has access to more than one experienced, reputable, carrier and can help guide you toward the coverage you need.
What are the risks of cyber crime?
Target and Home Depot quickly come to mind when you think of big, costly hacking cases involving data from millions of customers. These companies faced huge losses in both dollars and customer loyalty, and had to spend a great deal more to update systems and repair the public relations nightmare.
Now consider how a data breach could impact a small business that is equally reliant on technology in all of its forms to do business every day, yet may lack the resources to recover if faced with a similar event.
Cyber threats come in various forms, from hackers and personal or business identity theft to seemingly innocent errors and mishandling of information. The most common forms of cyber threats are as follows:
Hackers
Hackers can gain access to cash registers and credit card terminals in order to steal customer credit card information and use it to make unauthorized purchases. Hackers are also knows to attack networks from the outside with malicious code and malware that can cause systems to shut down and businesses to lose money.
Theft
Just as hackers can “virtually” steal sensitive information, physical assets and devices can be stolen by outsiders and even by rogue employees. If laptops, backup tapes, disks, or other devices that contain personal or sensitive information about customers are stolen, the information can again be used for unauthorized purchases and even identity theft.
Mishandling Information
Nobody’s perfect, and if your employees are well-trained, conscientious, and trustworthy, the mishandling or accidental exposure of sensitive information to outsiders can become a serious issue for your business.
No matter how it happens, the costs to your business can be devastating and far beyond replacing equipment or updating outdated computer systems. You might face loss of income/business interruption, fines and statutory reporting requirements, personal injury claims, and so much more.
Just some of the cyber risks you face include:
- Liability claims and lawsuits: You may be responsible for costs incurred by customers, business partners, or other third parties as a result of a cyber attack. You’ll likely have to pay for their damages, and if you’re sued you could be faced with crippling legal costs and seven-figure (or more!) payouts.
- Systems and data recovery: Repairing or replacing computer systems or lost data can result in significant costs. In addition, your company may not be able to remain operational while your system is down, resulting in a significant loss of income.
- Notification expenses: You’ll likely face statutory requirements to notify individuals or businesses that their sensitive data has been compromised. These notifications can be quite costly depending on the extent of the breach.
- Regulatory fines: You’ll likely have to pay significant fines if a data breach results from your failure to meet certain regulatory requirements.
- Class-action lawsuits: A large-scale data breach could lead to class action lawsuits on behalf of customers or partners whose data and/or privacy were compromised.
- Public relations and investigative costs: You’ll likely incur significant costs to investigate how the breach occurred and who the perpetrator was. What’s more, you’ll need to undertake a public relations campaign to restore your image and reputation, and to avoid a future loss of income.
- Long-term credit monitoring: You’ll likely have to provide costly, long-term credit monitoring services for those affected by the breach (e.g., customers whose sensitive data was compromised).
Article Reviewed by | Paul Martin