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Why Your Business Should Invest in a Cyber Insurance Policy

Jul 27, 2022

Business Insurance

Why Your Business Should Invest in a Cyber Insurance Policy

Most businesses today do not have a cyber insurance policy. Partly, this is because the owners don’t understand the available coverage options and how their premiums rates are determined. However, the rise in cyber-attacks since the pandemic has made insurance very crucial for companies that handle/store customer data or digital process transactions. Read on for deeper insights about businesses' need for cyber insurance protection.

How to Determine Your Cyber Coverage Requirements?

A study by Insureon showed that 27% of small businesses spend less than $1,000 on cyber liability insurance yearly. About 36% invest between $1,000 and $2,000 in coverage annually. For most of them, the median premium rate per month is $140.

Their policies provide coverage amounts between $1 million and $5 million or more. A regional bakery with fewer customers and smaller revenue would typically require a lower limit and pay less for coverage. An online and brick-and-mortar retailer with a national customer base would probably pay more. 

Importance of Reading the Fine Print

A cyber incident involving a credit card processor for a Texas-based business demonstrates the importance of carefully reading the insurance policy document. The payment processor lost over $10 million after being tricked into changing disbursement instructions. As per the language on the Texas business' cyber insurance, the policy would only cover losses if the Texas company was the victim. After a lawsuit, a court agreed to the cyber insurer’s denial of the claim as the credit card company was the victim rather than the covered policyholder. 

Factors Cyber Insurers Consider When Issuing a Policy

Before issuing your cyber insurance policy, your provider will audit your company for the following issues:

  • Information technology (IT) security: The proactive controls and measures you have in place to ensure IT security can impact your vulnerability to a data breach. You would pay more for insurance if your data security system was outdated and you utilized multiple vendors. Conversely, fortifying your network defenses can lower your cyber insurance cost.
  • User training: A prospective insurer will assess whether system users and IT staff receive adequate ongoing training to be able to recognize, thwart, and respond appropriately to cyber attacks. You’d be audited for training programs covering common threats like phishing, theft of credentials, and password security.
  • Breach history: Previous cyber breaches or claims enable your insurer to evaluate your risk exposure and identify potential security vulnerabilities within your organization.
  • Type of information or data you deal with: Your cyber insurer wants to know the type of information you collect and store to determine your risk levels. Cybercriminals often target high-value and sensitive data like financial, credit card, or personal health records.
  • Business Location: The physical site of your business and IT infrastructure may provide a crucial perspective into your cyber risk profile.
  • IT security regulations: Your data compliance levels determine your risk of facing regulatory fines after a cyber breach. You should pay attention to relevant regulations, from Europe’s GDPR and California’s CCPA to the Biometric Information Protection Act. Your prospective cyber insurer provider would scrutinize your business for data compliance.

Protect Your Business with Humble Insurance Group

Even with the measures you have in place to prevent a data breach in your organization, cyber-attacks can still occur. A cyber insurance policy would provide an additional layer of protection to avert significant financial loss in the event of a network attack or data loss. Contact our experts at Humble Insurance Group today to get started on customized cyber liability coverage.

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