Why businesses need Data Breach Liability Insurance Coverage (or Cyber Liability Insurance)
By now everyone should have heard the news on how Target had their systems hacked and their data was compromised. This data breach affected over 100 million Target Customers. So do you think that Target now sees the importance of having a Data Breach Liability Insurance policy?
How does this affect the Target? Well here are a 4 ways:
- They must notify every person who could have been affected by the breach. (Imagine the cost to notify 100 million people)
- They must offer credit monitoring to all of the affected individuals. (Which they have done if you go through their web site) Again, imagine the cost. Even if it is $5 per person for Target, that would be a $500 million expense.
- Their reputation was damaged as a result of the hack and they have to re-earn the trust of the public. It has affected their sales and they are spending tens of millions of dollars in advertising to re build their credibility.
- They probably will be named in a few lawsuits, maybe a class action suit. So the cost to defend and settle these suits will also be millions of dollars.
All four of these things will cost Target tens of millions of dollars. So the million dollar question is this: Is this covered by their insurance policy? And the answer is, yes, but only IF they have purchased a Data Breach Liability Insurance policy (also referred to as Cyber Liability Insurance policy).
If they did not purchase this separate coverage and just had their basic General Liability Insurance policy package, then they would be left on their own to cover these costs. And even a company the size of Target would probably be pushed to the brink of bankruptcy if they had to bear these costs on their own.
The small businesses we deal with in and around the Pasadena, MD area are nowhere near the size of Target. But it is clear that any business could be forced to bankruptcy if not properly protected by a Data Breach Liability policy. Our statistics show that it will cost a business an average of $70 per affected customer to handle a data breach situation. So if a small business has 1,000 clients and prospects in their database or files, the cost would be at least $70,000.
Now some people are probably thinking that they are not at risk like Target because they are too small for hackers to focus on. But a data breach can happen to any business.
What are types of data breaches that can affect small businesses? Here are some examples:
- Hacking – Hackers just don’t target large businesses, some troll around to find the easiest access point of small businesses as well. So make sure your firewall and security software are up to date.
- Lost Brief Case – Say you have several client files in your brief case, and you leave them at a table in the coffee shop while you pick up your order and when you return, the brief case is gone. You now have a data breach for all of the files that you had in the brief case and are required to take the notification steps that Target had to take.
- Stolen Laptop/Tablet/Phone – In today’s society, it is not uncommon for business people to have customer data on an electronic computing device. And these devices are targets for thieves. So if one of these is stolen from you or one of your employees, you have a data breach and are required to take the notification steps.
- Office Break In – Whether you have a data base or you have paper files, if you have an office break in, you have a possible data breach situation. Unless you can prove that no files were stolen or that your office database was not accessed then you have to take the notification steps. Proving that your computer was not accessed is pretty expensive because you would have to hire an independent computer forensics expert to attest that your system was not accessed in order to avoid having to go through the notification process.
I am sure there are numerous other examples that you can think of that would result in the possibility of a data breach. So don’t find out after the fact that you are not covered for this. Take the time to protect your business so you will not lose everything you worked hard for to build at the drop of a hat.
Huff Insurance is a full service Trusted Choice® Insurance Agency. We have been dedicated to Protecting Lifestyles™ since 1960. We offer a full array of Personal Insurance, Commercial Insurance and Life Insurance & Health Insurance products. Call us at 410-647-1111