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How to Mitigate a Growing Business Risk: Cybersecurity and Liability Coverage

by | Aug 11, 2022 | Cybersecurity & Data Privacy

Cyber-attacks can have catastrophic consequences on all areas of a business. But, have no fear— businesses can reduce these risks and mitigate potential financial loss by obtaining strong cyber liability coverage coupled with an emphasis on enhancing cybersecurity posture.

Recent Data on Cyber-Attacks

A cyber-attack was listed as the top business risk in 2019.[1] Since then, cyber-attacks have continued to evolve and become more dynamic. While standard business risks such as natural catastrophes and commercial property damage are somewhat predictable, cyber-attacks can happen from anywhere to anyone at any time within a matter of seconds. This makes it incredibly difficult to predict attacks, and as a result, cyber insurance premiums are rising.

For example, there was a 34.3% premium increase for cyber insurance in the fourth quarter of 2021. Cyber premiums have not increased by such a significant percentage since 9/11. Mid-size businesses were the most impacted by the 2021 increase in premium prices, and this continues to be the case in 2022.[2]

Why Does My Business Need Cyber Liability Insurance Coverage?

As the threat of a cyber-attack continues to evolve and increase, so does the potential liability and exposure. A quality cyber insurance policy is designed to address business losses from the various impacts of a cyber breach. This may include, but is not limited to:

  • Business Interruption
  • Lost Client Coverage
  • Data Loss
  • Network Damage
  • E-Crimes
  • System Failure

It is important to note that traditional commercial liability and property insurance do not cover cyber risks.[3] Even if your policy does have a provision related to cyber insurance, it may be incomplete or insufficient to properly address the potential risks. So, primary cyber insurance coverage is crucial. A strong cyber policy should include:

  • General Terms
  • First Party Coverage
  • Third-Party Coverage

What Are Some Best Practices for Mitigating Damage of A Cyber Attack?

  • An Emergency Response Plan for cyber-attacks and breaches.
  • Multi-Factor Authentication (MFA) for your web-based platforms and software.
  • Cyber incident response planning and testing.
  • Adequate backups and segmentation.
  • Employee training, such as Cybersecurity awareness training and phishing testing.
  • Ask cyber carriers about self-service mitigation programs like best practices, sample procedures, training, etc.

Overall, businesses need to adapt and take appropriate measures to protect against the risks associated with the ever-evolving threat of a cyber-attack.

Aleksey House is an Associate at Berenzweig Leonard, LLP. She can be reached at [email protected]. Aleksey thanks Isabel Wadsworth, our law clerk from the University of Richmond School of Law, for her assistance with this article.

[1] World Economic Forum, Regional Risks for Doing Business 22 (2019), https://www3.weforum.org/docs/WEF_Regional_Risks_Doing_Business_report_2019.pdf.
[2] Council of Ins. Agents & Brokers, Commercial Property/Casualty Market Index Q4/2021 (Mar. 4, 2022), https://www.ciab.com/download/33125/
[3] Brad Noe, What To Know About Cyber Insurance, Forbes (Nov. 27, 2019), www.forbes.com/sites/forbestechcouncil/2019/11/27/what-to-know-about-cyber-insurance/#3292274616a3.