A cyber insurance policy may provide companies with protection from losses resulting from a data breach or the loss of electronically-stored confidential information. Cyber insurance policies are designed to protect a company from the activities of hackers and other individuals or groups who may gain access to company-stored personal identifying information (PII).
The use of computers and the Internet has become an integral component of business operations over recent decades. Many businesses rely on the Internet to reach customers and to deliver services to clients. Frequently, this activity requires the transfer of confidential and private information from the client to the company and vice versa. Information may include credit card details, Social Security numbers, health records, and contact information.
BREAKING DOWN Cyber And Privacy Insurance
Cyber and Privacy Insurance Lessens the Blow to Companies
No matter how carefully organizations set up their cybersecurity protocols, unauthorized use of information remains a potential problem. The application of hacking through the use of social engineerings, such as phishing email attacks, or other methods exploits human tendencies and gain access to sensitive information. A ten-year study by Trend Micro found the use of hacking offered criminals the best returns for their efforts. These attacks create vulnerabilities beyond the protection of mechanical tools like encryption or password protection.
A data breach can have far-reaching implications for a company. It can disrupt day-to-day operations as the company tries to understand how the data breach occurred, repair the damage done to systems, and make the necessary system updates to prevent a similar violation from happening in the future. The publicity from a breach can negatively impact the business’ standing, as customers who have had their private data compromised may switch to a competitor and potential customers may walk away due to fears of losing their data as well.
Data breaches carry a significant threat of legal action. The company may be required to notify clients of the incident and may need to provide credit-monitoring services at no cost to the affected individuals who had their data stolen. Further, the company may be held responsible for fraudulent purchases and fund transfers due to their security cyber-mishap. In some cases, regulators may levy fines against the company, and individuals may file civil suits against the company for financial issues related to the breach of secured data.
These ramifications can make doing business online dangerous and costly. The purchase of cyber and privacy insurance coverage can help a business recover from the financial and regulatory burden a security breach can impose. The amount of liability coverage in a cyber and privacy insurance depends on the needs of the company.
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