Words of wisdom from our business insurance experts.
The Rising Demand for Cyber Insurance
While cyber insurance has been around for almost 20 years, claims trends have changed. Today, about half of businesses have experienced some type of cyberattack. The increasing frequency and cost of cyberattacks have caused a rise in digital insurance rates and premiums.
Per the United States Government Accountability Office's 2021 Report, the percentage of insurance clients opting into cyber policies has risen from 26% in 2016 to 47% in 2020. In addition, the costs of cyberattacks doubled. This increased opt-in for enhanced cybersecurity is not surprising considering the 69% rise in the number of cybercrime reports received by the FBI's Internet Crime Complaint Center in 2020 compared to 2019.
3 Common Types of Cyber Insurance Claims
While there are a wide variety of cyberattacks, the bulk of claims stems from data breaches, followed by claims for data privacy liability and cyber extortion.
Here's a quick overview of the top 3 cyber claims -
Data breaches account for the majority of all insurance claims. In fact, data breaches exposed over 37 billion personal records in 2020. Breaches include any incident in which an unauthorized entity gains access to digital data, devices, applications, or networks.
Cybersecurity breaches impact the livelihood of businesses in many ways including:
- Identity theft cases
- Considerable financial loss
- Decreased productivity
- Compromised reputation
- Loss of customers
- Intellectual property theft
Data Privacy or Cyber Liability
Cyber liability occurs when a business is accused of causing damage to a third party as a direct result of a cyber incident stemming from that business. An example of a cyber incident that can precipitate a cyber liability claim is if your business causes malware to spread to another company's network due to ineffective cybersecurity, thus compromising this other company's data privacy. Cyber insurance can help protect your business from becoming vulnerable to data privacy claims.
Picture this: you operate a technology business and store customer information (personal, payment, business, etc.). One of your employees gets an email from a party that seems legitimate and opens an attachment. Without knowing, a hacker enters your system and steal sensitive data. Months later, it's found that your systems breach caused harm to another person and they sue for damages.
A Cyber Liability and Data Breach policy is going to defend lawsuits and covers claims associated with the data breach.
Cyber extortion is the event in which an individual or entity disables a company's operations or compromises personal data and then demands payment to stop the cyberattack. The most common types of extortion are ransomware and DDoS, or Distributed Denial of Service, attacks. In 2020, one out of six businesses fell victim to ransomware, with about half of these businesses paying out the ransom.
Picture this: you operate a manufacturing facility that relies on computers and data to run it's machines. A breach occurs through an employees home WiFi network and a cyber criminal gains access to your systems. They demand $500,000 to stop the attack and allow your machines to operate.
Your cyber insurance carrier will negotiate with the hacker so you can run your business. It will also pay loss of income and any fees to secure the system again.
The Devastating Cost of Cyberattacks
The average cost of a data breach in the U.S. is $9.44 million, while the global average cost of a data breach is $4.35 million. Per industry, health care gets hit the hardest with data breach costs. The average total cost of a healthcare data breach is $10.1 million.
Although not as common as breaches, ransomware attacks have been rising in frequency. The average cost of a ransomware attack is $4.54 million, while the cost of any destructive cyberattack is around $5.12 million
The Cutting Edge Source for Cyber Insurance
At Fullsteam Insurance, we connect you to superior insurance coverage across all 50 states. We strive to deliver a streamlined and secure experience using innovative technology to provide you with the best cyber insurance for your business. Our cyber advisors work directly with your or leadership to design an insurance portfolio to protect your people, property, customers, and more.
Schedule a consultation with one of our advisors today