“In 2021, the average cost of a data breach globally soared to $4.24 million, the highest in 17 years.” This staggering figure highlights a harsh reality: in the digital age, cyber threats loom larger than ever, and the financial implications can cripple an unprepared business. Cyber insurance for businesses has transitioned from an optional safeguard to a critical asset.
This blog delves into why cyber insurance is indispensable, supported by real-life examples, compelling statistics, and expert insights.
Unpacking Cyber Threats: What Businesses Face
Cyber threats have evolved into sophisticated attacks that can occur in multiple forms. Here, we explore the major types of cyber threats, supported by real data and incidents, to illustrate the potential dangers businesses encounter.
Data Breaches:
Data breaches involve unauthorized access to confidential data, often leading to its theft or publication. A notable example occurred in 2013 with Target Corporation, where an attack resulted in the theft of data from about 40 million credit and debit cards. The breach not only cost Target approximately $162 million but also damaged its reputation and customer trust significantly.
Ransomware Attacks:
Ransomware is a type of malware that locks and encrypts a victim’s data and then demands a ransom to restore access. One of the largest ransomware attacks was the WannaCry attack in 2017, which affected more than 200,000 computers across 150 countries, with total damages ranging from hundreds of millions to billions of dollars. Healthcare systems, government agencies, and private businesses were impacted, showing the critical need for preventive measures and insurance.
Business Email Compromise (BEC):
BEC attacks involve fraudulent attempts to obtain access to a company’s financial resources through email intrusion. According to the FBI’s 2019 Internet Crime Report, businesses lost over $1.77 billion to BEC scams. An example is the Austrian aerospace parts manufacturer FACC, which lost about €50 million through a BEC scheme.
Phishing Attacks:
Phishing involves tricking individuals into providing sensitive information via deceptive emails and websites. Verizon’s 2020 Data Breach Investigations Report highlighted that phishing attacks constitute 22% of all data breaches. For example, in 2016, a Lithuanian hacker orchestrated a phishing scheme that duped two U.S.-based tech companies, identified by law enforcement as Google and Facebook, into wiring over $100 million.
Distributed Denial of Service (DDoS) Attacks:
DDoS attacks aim to disrupt service by overwhelming the targeted servers with a flood of internet traffic. One of the most disruptive was the 2016 attack on the DNS provider Dyn, which disrupted access to major websites like Twitter, Netflix, and CNN in large parts of North America and Europe.
Insider Threats:
Not all cyber threats come from outside; employees can also pose significant risks. Whether through malice or negligence, insider threats are costly and challenging to detect. For example, in 2018, Tesla sued a former employee for allegedly stealing gigabytes of data and making false claims to the media.
Expanding Awareness and Protection
These real-life examples highlight the diversity and complexity of cyber threats facing businesses today. Each type poses unique challenges and potential financial and reputational damages, underscoring the critical need for cyber insurance and robust cybersecurity measures.
To effectively protect against these threats, businesses must:
- Conduct regular cybersecurity training for all employees.
- Implement strong security measures such as multi-factor authentication and encryption.
- Regularly update and patch systems to defend against known vulnerabilities.
- Invest in comprehensive cyber insurance that covers various incidents, ensuring swift recovery and minimal disruption.
By the Numbers: The Stark Reality of Cyber Incidents
Statistics paint a vivid picture of the cyber threat landscape:
- 43% of cyber attacks target small businesses.
- 60% of small businesses that fall victim to a cyber attack go out of business within six months.
- The average time to identify a breach in 2020 was 207 days.
These numbers not only underscore the prevalence of cyber risks but also highlight the devastating impact of cyber incidents on businesses, especially small to medium-sized enterprises (SMEs).
Real Stories, Real Impact: Businesses Before and After Cyber Insurance
Without Insurance:
In 2017, a small family-run business in Ohio, Brooks Brothers, experienced a severe data breach that exposed sensitive customer information including credit card data. The breach, which went undetected for several months, affected numerous stores across the country. Without comprehensive cyber insurance, the costs for forensic investigations, customer notifications, and legal fees placed a significant financial burden on the company. Furthermore, the damage to their reputation led to a loss of customer trust, which took years to rebuild.
With Insurance:
On the flip side, in 2019, a Baltimore-based healthcare provider fell victim to a sophisticated ransomware attack. Thanks to their robust cyber insurance policy, they were able to quickly engage cybersecurity professionals to manage the situation. The insurance covered the ransom payment, which was made to mitigate the risk of patient data exposure, as well as the subsequent costs for system repairs and strengthened security measures. The quick response facilitated by the insurance coverage helped maintain patient trust and minimized disruptions to services.
These real-world examples underscore the stark differences in outcomes between businesses with and without cyber insurance when facing cyber threats. By choosing the right cyber insurance, companies can not only ensure financial support in the wake of cyber incidents but also gain access to expert assistance that is crucial for quick recovery.
Comprehensive Coverage: What Does Cyber Insurance Really Cover?
Cyber insurance is designed to provide financial safety nets for various scenarios that could cripple a business digitally and financially. Here’s an expanded look at what these policies typically cover:
Legal Fees and Expenses:
In the aftermath of a cyber incident, legal expertise becomes crucial. Cyber insurance covers the cost of legal representation, which may involve defending against claims of negligence or failing to protect customer data. For instance, after the Equifax breach in 2017, the company faced numerous lawsuits requiring significant legal resources. Cyber insurance helps mitigate these costs, providing access to qualified legal professionals who specialize in cyber law.
Notification Costs:
Following a data breach, businesses are often legally required to notify affected individuals, which can be a costly process. This includes the expenses related to communicating the breach to customers, such as postage, call center setup, and, in some cases, the provision of credit monitoring services to the affected parties. For example, when the healthcare provider Anthem was hacked, they had to notify approximately 80 million individuals, a process covered by their cyber insurance.
Loss and Recovery of Data:
Data is often a company’s most valuable asset. Cyber insurance aids in recovering data lost in breaches, covering costs for expert services in data recovery and system restoration. Following the 2018 ransomware attack on Atlanta, data recovery and reconstruction were vital, involving significant expenses.
Business Interruption:
If a cyber attack disrupts operations, a business can suffer lost income due to downtime. Cyber insurance compensates for lost revenue and helps cover ongoing operating expenses during business interruptions. For example, when Maersk was affected by the NotPetya attack in 2017, cyber insurance played a crucial role in mitigating financial losses during their recovery.
Extortion:
Cyber extortion coverage pertains to situations where cybercriminals demand ransom to stop an attack, such as locking data with ransomware or threatening to release sensitive information. This coverage includes negotiation services and the ransom payment, if necessary. An example is the 2020 attack on the University of California San Francisco (UCSF), where cyber insurance covered part of the $1.14 million paid to decrypt files essential for academic research.
Crisis Management and Public Relations:
This aspect covers the costs of managing the crisis caused by a cyber incident, including hiring public relations firms to restore public confidence in the business. After a significant breach, maintaining or restoring trust can be as crucial as addressing the breach itself. Cyber insurance supports efforts to communicate effectively and transparently with the public and stakeholders.
Cyber Forensics Support:
After a cyber attack, it’s essential to understand how the breach occurred and how to prevent future incidents. Cyber insurance often includes the costs of hiring forensic experts to analyze the breach’s cause and scope. This was evident in the Sony Pictures hack, where forensic teams worked extensively to track the origin of the breach and strengthen systems against future attacks.
Tailoring Coverage to Your Needs
Tailoring your cyber insurance coverage to your business’s specific needs is crucial in effectively managing cyber risks. At Mitigata, we understand the complexities of the digital landscape and offer tailored cyber insurance solutions designed to protect your organization from the ever-evolving threats of cybercrime.
Our team assesses your unique risk profile, considering factors like data sensitivity and cyber threat exposure, to tailor your cyber insurance. We customize a comprehensive cyber insurance policy to protect you against a wide range of cyber incidents.
Mitigata provides not only financial coverage but also expert resources for managing cyber incidents, including forensic investigations and crisis support. We assist in mitigating the business impact of cyber attacks through expert guidance in forensic analysis and crisis management.
Don’t wait until it’s too late. Invest in cyber insurance from Mitigata today and safeguard your business against the growing threat of cybercrime. Contact us now to learn more and get started with a personalized cyber insurance solution tailored to your needs.
