Only 29% of Business Have Adequate Cyber Insurance, Though Data Breach Cost $36K

Data breach insurance

With the global cost of cyber crime estimated to be between $375 million and $575 million annually, cyber insurance is big concern for today’s businesses (1). But the cyber insurance industry is still relatively new and many businesses are without adequate coverage against data breaches and other cyber risks.

If your business accepts credit cards and online payments or deals with sensitive personal data, then it really needs to mitigate the risks associated with data storage by investing in a tailored cyber insurance policy. Risks come not just from computer hackers but also from natural disasters (which can wipe out databases) and human error.

But research by the Council of Insurance Agents and Brokers has shown that only around 29% of US businesses have proper cyber insurance coverage. Even among the big companies coverage is low, with only 40% of Fortune 500 companies having a cyber insurance policy in 2015. This is despite the fact that 43% of companies have experienced a data breach, according to the Ponemon Institute.

The focus on cyber risks has been on larger companies, but it’s smaller businesses that are arguably the ones who are most in need of coverage. Small businesses are often the targets of hackers as their security is likely to be weaker, unfortunately it can often take them longer to recover from a data breach. According First Data, 90% of all data breaches affect small businesses, with the average cost of a data breach being around $36,000. Yet fewer than 6% of small businesses have cyber insurance.

The fact that uptake of cyber insurance has been so low is largely due to it being a relatively new insurance coverage. A recent Deloitte study identified several obstacles to meeting the demand for cyber coverage. These include buyers (businesses) not fully understanding cyber risks or insurance options, and elements of cyber risks often being spread across other insurance policies.

Businesses often wrongly believe that they are adequately covered under their general liability insurance, although many policies will only cover physical (and not virtual) incidents. There are also additional risks associated with data breaches and network failures, such as fines, legal settlements and negative media coverage, which other policies may not effectively deal with.

For a relatively small sum, you can purchase a tailored cyber liability insurance policy that will cover:

  • Expenses relating to the investigation of a data breach
  • Legal costs
  • Costs of communicating data breaches to customers
  • Business interruption costs
  • Public relations costs
  • Fines and penalties
  • Network failure costs

You can find out more about cyber liability insurance and get a free quote for a cyber insurance policy here.