Cyber insurance: what is and why it’s necessary
Picture this: You come into work one morning, pour yourself a coffee, and sit down at your desk. You turn on your computer, only to find that it’s completely locked, along with all of the others in the office. You’ve been the victim of a ransomware attack, and the hackers are demanding that you pay them in bitcoin in order to decrypt your network. What do you do?
While many businesses have backups and are able to recover their data without losing more than a day’s work, many do not. What happens then? You either pay the ransom, or begin the long and painstaking process of re-creating all of your files, invoices, and everything else needed for your business to function. Sounds expensive.
Even if you are able to get back up and running quickly, you will have to notify your clients that their information may have been compromised. A new Canadian law that came into effect on November 1st, 2018 requires companies to notify consumers by registered mail if their personal information may have been breached. What kind of information you ask? Think names, addresses, dates of birth, or credit card information. Some of these individuals might also need credit monitoring and new credit cards. Who do you think will be paying for this? That’s right, you are.
KBD offers cyber insurance packages designed to protect you in exactly these situations.
First, let’s look at the direct costs that would be covered. This would be the labour and resources needed to recover the lost data, any damage to your system network, legal fees, any theft of funds, the costs to notify your customers of the breach, and the cost for an IT expert to remove the malware.
Second, it will cover your lost profits during the shutdown, also known as “business interruption” coverage. This is the same type of coverage you would have if your business was temporarily closed after a fire or flood.
Finally, a good cyber insurance policy will offer coverage for reputational harm. This means that even if you lose potential or current clients because of a data breach, you will be covered for the lost profits for a certain period of time, usually up to one year.
The costs related to a cyber attack are almost always larger than one may think, and are often enough to put unprepared companies out of business. Having a cyber insurance policy is an easy but important step that your company can take to prevent this from happening.
Cyber attacks are becoming more and more frequent, targeting businesses both big and small. The chance of falling victim to one of these attacks in Canada is about 1 in 10. There is actually a greater chance of being hacked than of having a fire in most cases. Nearly every business has insurance for fire, so with those odds it would make sense to insure against cyber crime as well, right?