6 Reasons Why Cyber Insurance Makes Smart Business Sense

6 Reasons Why Cyber Insurance Makes Smart Business Sense

Cybersecurity-smart companies understand that cyber incidents are a fact of life. That's why they buy cyber insurance.

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Most companies purchase general liability insurance to protect themselves from potential lawsuits or claims resulting from accidents, injuries or negligence. They purchase professional liability insurance to protect themselves against the cost of errors, malpractice or negligence in services provided to their customers. Likewise, many companies are required by states to buy workers’ compensation insurance to ensure they can cover an injured employee’s medical expenses and loss of income.

So, why don’t more companies purchase cyber insurance to protect themselves against first- and third-party claims arising from cyber incidents?

Surprisingly, almost six in 10 small and medium-size enterprises (SMEs) don’t have any type of cyber insurance, according to “Under Attack and Unprepared: Argo Group Cyber Insurance Survey 2017,” a survey of 200 organizations in the U.S. and U.K. Also, of the 57 percent of SMEs that lack cyber insurance, only 27 percent say they are inclined to purchase a policy.

In today’s hyperconnected digital world, in which a lost or stolen laptop, a weak password, or a cleverly crafted phishing email can result in a massive data breach, does a lack of cyber insurance constitute good business sense?

We don’t think so. Nor do the respondents to the Ponemon Institute’s survey on cyber insurance – 76 percent of the respondents say cybersecurity risks are equal to or greater than other insurable business risks such as natural disasters, business interruptions and fires.

Here are six reasons why cyber insurance is most likely a sound business investment for your company:

  1. 1. Data breaches are costly.

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    The average consolidated cost of a data breach in 2016 was $4 million, according to the Ponemon Institute’s 2017 Cost of Data Breach Study.

  2. 2. Cyber incidents happen. A lot.

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    Nearly two-thirds of SMEs have been the victim of a cyber incident, according to the Argo cyber insurance survey.

  3. 3. Coverage works.

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    Almost nine in 10 SMEs say their cyber insurance covered the cybersecurity incidents they suffered.

  4. 4. Cyber insurance customers are happy customers.

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    Companies with cyber insurance are pleased with their policies, with 87 percent of SMEs reporting that their policy performed as expected. In addition, more than two-thirds of policyholders are pleased with their policy and have no intention of considering a change of provider until they review their policy in 12 months.

  5. 5. Uninsured companies believe they are well-protected.

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    The No. 1 reason for not purchasing a policy is the belief that in-house security people and processes provide all the needed protection. Moreover, only four in 10 Argo survey respondents say their company is a potential cyber target.

    Yet cybersecurity experts’ prevailing message is that cyber incidents are a fundamental fact of life – it’s not a question of if a data breach will happen but when. Companies that think they are not vulnerable ignore the fact that data breaches do occur, both by accident and by design. Even the late Steve Jobs was the victim of a phishing attack.

  6. 6. It’s risk management, plain and simple.

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    Cyber insurance provides much-needed protection in the event of a cyber incident.

Policies like Argo Pro’s Cyber Tech PROtect℠ provide first- and third-party coverage, offering services such as:

  • First-party coverage for breach notification, breach mitigation, crisis management, business income and extra expenses, data restoration, theft of money or securities by outsiders, and network extortion.
  • Third-party coverage for a privacy breach or security event.
  • Coverage for regulatory fines, penalties and restitution resulting from privacy regulatory action (privacy regulatory coverage includes defense expenses).
  • Coverage for PCI DSS fines and penalties available by endorsement.
  • Access to risk management services provided by NetDiligence’s eRiskHub website.

Companies that purchase cyber insurance do so because they understand the reputational impact and the potential for significant costs that come with a breach. The consequences of a loss of confidential data or the loss of income due to a system outage can be acute. Cyber insurance helps protect your business from these risks. Not having its protection – or access to the expert breach response services that help you navigate the minefield of issues that follow a breach – will put you at a significant disadvantage. Don’t let your company become the next victim.

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