It might feel like cybersecurity risk is only for the big companies. After all, they’re the ones making headlines. But according to the Government of Canada, about two-thirds of Canadian businesses have been targeted by a cyberattack.
Commercial auto, property and liability insurance are the staples of every business risk portfolio. Most business owners wouldn’t consider doing business without them. A hack can be just as devastating as a fire.
The expense of restoring corrupted computer files, replenishing lost income due to business interruption and paying ransom demands is enough to cut into your profits. Add the costs of notifying clients about the breach, paying for credit monitoring, defending yourself against inevitable lawsuits, paying federal and provincial fines, and remedying your tarnished public reputation, and you’ve got a recipe for bankruptcy.
Discover how cyber insurance can protect your business income and help you recover after a cyberattack.
Reliance Insurance will help you insure the gaps by identifying your risk exposure areas and matching you with the best policy for your risk level.
Even a minor data breach can ruin your business
If a breach exposes personal data, you could be required to offer free credit monitoring services for up to two years. Credit monitoring services can cost $10 to $30 a month per individual, and that adds up.
For example, if you’re found liable for the breach of 2,000 accounts, the cost to comply with credit monitoring services starts at $240,000. Since cybersecurity and data protection laws exist in nearly every province, you can’t ignore credit monitoring. If you have international clients or vendors, your risk is greater. Most countries have cybersecurity legislation, which means more penalties and the added complication of international lawsuits.
Even if you manage to escape a lawsuit, the out-of-pocket cost of credit monitoring services and government fines could devastate your business.
Cyber insurance is highly customized, so you can design coverage to suit your needs and budget.
What does cyber liability insurance cover?
Some insurance companies distinguish between cyber liability and data breach insurance, but often it’s just a difference of terminology. Cyber liability insurance covers things like:
- Lost income caused by a cyberattack (fines, ransom payments, downtime)
- Customer notification of a data breach (legally required)
- Reputational damage and public relations (support from experts who understand the process)
- Legal defense costs (if a client or vendor sues you for exposing their data)
- Civil damages and settlement awards (as a result of the lawsuit)
- Damaged computer systems and networks (cost of hiring tech experts)
- Free credit monitoring for affected customers
- Data restoration (tech assistance to recover compromised data)
- Cyber extortion and ransom demands (to cover ransoms paid for the code to unlock your data)
- Ransom negotiations (help from experts who have done it before)
- Fines and penalties (vary based on the province you’re in)
- Computer fraud (if a computer is used for information theft, denial-of-service schemes or hacking)
- Loss of transferred funds (money transferred to an impostor)
- Loss of revenue and business interruption due to a cyberattack (if your website, network, or computer records are inoperable and you must temporarily close to repair them)
- Dependent business interruption system failures (if other networks or vendor networks go down and you lose business because of it)
- System failures of outsourced providers (if your vendor or partner providers are compromised)
- Betterments (to replace damaged systems with upgraded systems)
Cyber liability options in detail
Once you understand your options, it’s easier to make informed decisions. The information below will help you better understand the various coverages.
Forensic investigations
Costs related to computer forensic analysis. Forensics can reconstruct how a data breach occurred, identify the stolen data and assist with restoration. (Data reconstruction might be a separate endorsement, so check with your broker.)
Litigation (defense) expenses
Defense costs related to the data breach. Check the limits and the wording. Legal bills might exhaust your coverage before your claim is completed. You might want to get excess or umbrella coverage.
Regulatory defense expenses or fines
Expenses associated with federal and provincial laws. You might have to defend yourself in civil court and pay fines or penalties for noncompliance with existing data protection policies (like the Personal Information Protection and Electronic Documents Act).
Cyber event response coaching
Proactive consultation. Depending on the policy, you might get free, proactive advice from a data response coach (usually a lawyer) on compliance and security to prevent a breach. Check with your agent about this valuable coverage.
Crisis management and reputational damage
Public relations and customer notification. You’ll incur costs to notify customers about the breach and provide free credit monitoring services. You’ll also have to release statements about how you’re handling the incident and the steps you’re taking to prevent a future breach. You’ll probably need a company to do these things for you. (Some policies have a complimentary service, while others reimburse your expenses.)
Business interruption and losses
Lost business due to a security breach. If a hacker takes down your website or ordering system, your clients (and vendors) won’t be able to do business with you. Depending on the hack, you could lose weeks of revenue while restoring your systems.
Cyber extortion and ransom demands
Negotiations. If a hacker locks you out of your network and encrypts your data, you’ll need help negotiating the demands. (Think about losing the use of your email, client relationship manager, website, e-commerce, proprietary data, ordering systems, fleet tracking or GPS.)
Betterments
Upgrade after an attack. A betterments endorsement can help offset the cost of replacing hardware or software after a covered data breach. After the attack, you’ll probably need the upgrades to correct any vulnerabilities. You might even be required to make the upgrades as part of your claim settlement.
Post-breach first party
Helps when your system is breached. It can cover data restoration, client notification and forensic analysis (to uncover what happened).
Post-breach third party
Helps when your client’s system is breached and they sue you for it. It can cover your legal defense costs or forensic analysis to prove (hopefully!) you weren’t the weak link that caused the breach. It’s an asset to freelancers and businesses working inside their clients’ systems.
Extended reporting period (ERP)
Extends the dates of coverage for reported claims. An ERP allows you to extend the dates that your insurance coverage will respond to a claim. It can be useful if you think you might have a claim reported against you after your policy has ended.
Claims-made basis
Claims are covered only if the claim is reported within the dates of the policy. A claims-made policy covers claims reported during the policy period or within the ERP. Check the declarations page of your policy for coverage dates and extensions.
Per-occurrence basis
Claims are covered based on the date of the event. Per occurrence covers incidents that occur during the active policy dates, even if reported years later. It’s unusual for a cyber policy to be on a per-occurrence basis.
The cost of a cyber policy
Cyber liability insurance is priced based on your business risk exposure. Companies that process payment information or store personal information are at the higher end of the price spectrum. Cyber insurance is highly customized, so you can design coverage to suit your needs and budget. Depending on the deductible and your business risk rating, you could get $1 million in coverage for less than $2,000 per year. That’s not too bad when you weigh it against the cost of mandated credit monitoring services.
Your broker can help with the moving parts
Cyber liability insurance responds to many interrelated moving parts, and the policies can get just as complicated. That’s where we come in. We’ll help you insure the gaps by identifying your risk exposure areas and matching you with the best policy for your risk level. Call us. We’re happy to explain the details (no tech experience required)!
Reliance Insurance supports clients across Canada through a national network of offices and globally through our broker network partners.