Why A Robust Cyber Liability Insurance Solution is Key
Last month we discussed the massive data breach that hit Target and the reputational damage that the retailer faces. In fact, just last week, Target announced that its profits had fallen in part due to the cyber attack during the holiday season. According to the retailer, it spent $61 million in the fourth quarter on costs related to cyber theft, although it does expect that its insurance will cover about $44 million of this total. Moreover, the real costs may not be known for years as a result of litigation with some speculating that this could run into the hundreds of millions of dollars. In fact, one security analyst at technology research firm Gartner Inc. puts the costs of the Target breach at between $400 million and $450 million, including bills associated with fines from credit card companies and services for its customers like free credit report monitoring, as reported by the Dallas Morning News.
On the heels of the Target breach, we had additional headline-making attacks hit the papers, including confirmation in January by luxury retailer Neiman Marcus of a breach that occurred between July and October of last year. Neiman Marcus confirmed that stolen customer credit card information during this time had cost the $4.1 million so far, which includes legal fees, investigations, customer communications and credit monitoring subscriptions. Fund-raising platform Kickstarter then revealed its data had been compromised, including user names, email addresses, mailing addresses, phone numbers and encrypted passwords. And, last month the University of Maryland advised its community that the school’s database had been hit, including names, Social Security numbers, dates of birth and university identification numbers for 309,079 individuals.
And although these are all high-profile cases, the fact is that cyber crime is getting more commonplace and increasingly more sophisticated across all industry sectors and all size companies, putting at risk the privacy and information of an organization’s constituents (whether customers, patients, students, etc.), the assets of an organization and its reputation. As a result, it’s imperative that management and directors and officers of public, private and non-profits ensure that their organization or entity has robust security protocols; policies and procedures for responding to an attack, including notifying the public; and a proper Cyber Liability insurance solution secured. It’s all an integral part to one’s cyber strategy. In today’s litigious environment, when a data breach occur, you have lawsuits, finger-pointing, a drop in sales (and shares for public companies), regulatory fines and accusations that management was not on their toes. It’s only prudent that management and its board can defend against cyber attacks, respond to them, and have the insurance in place to cover costs.
It’s also important that a company doesn’t think it can go without coverage – that it’s too small to be hit by a data breach. Statistics from Symantec show that in 2012, 31% of attacks were focused on companies with between one and 250 employees.
Cyber security and Cyber Liability insurance should be part of every organization’s agenda. At Caitlin-Morgan, we can help you implement a sound Cyber insurance solution for your clients, along with reviewing their Directors & Officers Liability program to help you implement an effective overall strategy. Please give us a call at: 877.226.1027
Source: Dallas Morning News, Reuters