What is Cyber Liability Insurance?

November 11, 2023

What is Cyber Liability Insurance?

Cyber Liability addresses the first- and third- party risks associated with e-commerce businesses, the Internet, networks and informational assets. Cyber Liability Insurance offers coverage protection for exposures arising out of Internet communications.

The concept of Cyber Liability takes into account first- and third- party risks. The risk category includes data storage, business interruptions, fraud and theft, extortion, crisis management, copyrights, privacy issues, virus transmission, or any other serious trouble that may be passed from first to third parties via the Web.

When do I need Cyber Liability Insurance?

Anyone with a Web site now has the legal liabilities of a publisher, and has a legal responsibility to protect customer privacy information.

Creating a Web site is simple. The exposures that come with it are not. Cyber Liability is a constantly evolving risk for every business today. Over the last several years, cyber liability insurance has grown from coverage designed solely for information technology companies to coverage that applies to all industries. Any business that has any form of personal information of their customers or employees (whether in electronic or paper/non-electronic format) has cyber exposure and is at risk.

States are reacting swiftly to data breach issues with sweeping legislation affecting almost all businesses. Recently enacted laws require notification to all customers affected by a breach, whether or not their information has been used maliciously. In most cases, the notification also requires an option of one year credit monitoring services and a new card or account number for customers. Costs can be as much as $250 for each individual affected by the breach, and the average is around $188 per individual.

Why do I need Cyber Liability Insurance?

Traditional liability products do not address Internet exposures and the risks involved in Internet businesses have blossomed with the Net itself. This is why you need to consider Cyber Liability Insurance when reviewing your business’s insurance needs.

What are the risks in dollars regarding to Cyber Liability?

Below is an example of what your personal data is worth to a hacker.

  • Utility bill scanned = $10
  • Full identity = $6 to $80
  • Gmail user name & password = $80
  • Facebook user name & password = $300
  • Bank account credentials = $15 to $850
  • Credit card with $1,000 available = $25
  • Credit card with personal information = $80

Below are a few Cyber Liability claims examples.

  • A manufacturer received a call and email from whom they thought was their bank, asking for a verification of funds request. The CFO provided the information and, $75,000 was removed from their account. The cyber thief was able to take $75,000 from the manufacturer.
  • A restaurant had 200 credit card records stolen. The hacker was able to charge an additional $120,000 from the credit cards. The restaurant incurred notification costs and direct damages costs of over $250,000.
  • An employee of an insurance broker lost a laptop while traveling. The laptop contained names, addresses, birth dates and social security numbers for company employees. The company paid for one year of credit report monitoring to affected employees to mitigate future issues. The total cost was $25,000.
  • An auto dealership was the target of identity thieves when two men broke into the dealership after hours, stealing files containing financial information from customer transactions including credit reports, bank statements and social security numbers. The thieves were eventually apprehended, but not before making illegal purchases with the stolen identities of dealership customers. The dealership incurred over $102,000 in notification costs.