Feb 27, 2024Why Cyber Insurance Is Becoming A Business Staple
Key Things for Your Clients to Consider Regarding Cyber Insurance
If a business is operating without a cyber insurance program, they are opening themselves up to a world of issues when it comes to the fallout of a data breach. According to CNBC, cyberattacks cost small businesses alone more than $200,000, causing them to have to close their doors in some cases.
Businesses, no matter what size or shape or industry, can avoid something like this by investing in a comprehensive cyber insurance program, like through Tangram Insurance Services. But what should they be looking for when it comes to obtaining this very important layer of coverage?
In today’s digitally dependent and digitally connected world, cybersecurity measures have become even more of a necessity to offset risks posed by cyber attackers. Third-party cyber liability insurance claims are not covered under most general liability policies that clients may have already and directors and officers (D&O) policies usually exclude cyber liability claims.
Choosing cyber insurance is not the easiest process to go through and, in fact, can present a number of questions to consider. To help make things easier, we’ve broken down some important considerations for new cyber insurance customers.
Levels of Coverage Considerations
One of the most important parts of choosing the right level of cyber liability coverage is determining what type of coverage a company needs based on anticipated cyber risks that are connected to a company’s operations and position in their industry.
First, a client should consider its industry and the type of services it offers as well as the type of data it handles on a daily basis. Depending on the kind of data it collects and uses, the company will be subject to a different group of regulations as opposed to other companies. This should inform the company regarding the type of cyber insurance coverage that should be looked into.
If a company is a bank, for instance, it must comply with certain privacy rules compared to a healthcare client’s, which has to comply with certain privacy requirements.
Next, there are costs to consider when finding the right kind of coverage. A client should know about the difference between first-party and third-party costs related to cyber breaches.
First-party insurance costs include forensic investigation costs to determine the source of the cyber breach and the extent of harm that was caused. There are notification costs to customers whose information was compromised as well as data restoration costs. And finally, business interruption is considered when looking at first-party coverage, which can help restore business functions.
For third-party coverage, a company may also incur costs as a result of a cyberattack, such as defending against regulatory action. There is also the extent of coverage desired to consider, such as legal fees in defending a claim. These fees can usually approach or exceed the ultimate cost of settling a claim. A company interested in third-party cyber liability coverage should decide if they want to pay out litigation costs, which in turn breaks apart its limit of liability, or whether defense costs should be added in addition to the limit of liability.
About Tangram Insurance Services
Located across the Golden Gate Bridge, just outside of San Francisco, Tangram Insurance Services is a full-service Managing General Underwriter and Program Manager offering specialty programs. We focus on industry-relevant coverage, competitive pricing, and practical business and risk management solutions for your clients. Since we are not all things to all people, we make sure to create outstanding custom-built solutions that matter to those businesses, and the brokers who serve those industries. Contact us at (888) 744-9810.