According to Insurance Business Magazine, the fastest-growing coverage in the United States is cyber insurance. Businesses both large and small are susceptible to cyberattacks and data breaches. The consequences of each are similar regardless of business size.
People may confuse cyber insurance with technology errors and omissions coverage. The International Risk Management Institute describes the difference: Tech E&O covers the producers of the technology while cyber insurance covers consumers.
First-party damages are harms affecting the business itself as a result of a cyberattack. For example, if a company experiences cyber extortion through a ransomware attack, cyber insurance covers the resulting losses. First-party damages also include funds transfer loss, data destruction and business interruption due to a cyberattack.
Cyber insurance also covers third-party damages, which are losses or harm to a business’s customers due to a data breach. The business may be liable for customers’ financial losses due to identity theft. Customers may require credit monitoring at the company’s expense. The company is often responsible for notifying customers of the breach, and that can be costly. The law may also impose penalties such as fines on the company.
These expenses can be devastating, particularly for small businesses. Cyber insurance can cover them so that business owners do not have to reimburse third-party damages out of their own pockets.
Any business that collects data or conducts transactions electronically may be vulnerable to data breaches. Cyber insurance is not a requirement for running a business, but it may be the critical element that ensures a business’s survival in the wake of a cyberattack.