Cyber Liability Insurance

What is Cyber Liability?

Why do you need it?

• Client Requirements
  Many clients now require their partners and service providers to carry Cyber Liability Insurance as part of contractual agreements, ensuring that data handling and security breaches are covered
• Customer Trust
  A cyber breach can significantly erode customer trust. Cyber Liability Insurance often includes coverage for public relations and crisis management services to help restore company reputation.
• Evolving Risks
  Cyber threats are not static; they evolve rapidly. Ransomware, phishing attacks, data breaches, and DDoS attacks are becoming more sophisticated, making businesses perennial targets.
• Volume of Attacks
  The sheer volume of cyber attacks has increased, with businesses experiencing breaches more frequently than ever before. No industry is immune, underscoring the universal need for Cyber Liability Insurance.
• Business Interruption
  Many businesses experience significant operational downtime following a cyber incident, leading to lost revenue and productivity. Cyber Liability Insurance can cover lost income during such interruptions.
• Regulatory Compliance
  With the introduction of regulations like GDPR in Europe and various state-level laws in the US, businesses are legally obligated to protect consumer data and notify them of breaches, necessitating adequate insurance coverage.
• Legal and Regulatory Penalties
  Fines and penalties associated with failing to protect data or not complying with notification laws can be financially crippling. Insurance helps mitigate these costs.

Common coverage parts

• Immediate Response Costs
  Expenses related to investigating a breach, hiring cybersecurity experts, and implementing immediate fixes.
• Notification Costs
  Costs associated with notifying affected individuals and regulatory bodies about the breach, as mandated by law in many jurisdictions.
• Credit Monitoring Services
  Fees for credit monitoring and identity theft protection services for individuals affected by a data breach.
• Business Interruption Losses
  Compensation for lost income and increased costs of operation while dealing with the aftermath of a cyber attack, including system downtimes.
• Data Restoration
  Costs associated with recovering or restoring lost or corrupted data as a result of a cybersecurity incident.
• Ransomware and Extortion
  Coverage for payments made in response to ransomware demands or cyber extortion threats, along with related negotiation and investigation expenses.

• Legal Defense Costs
  Legal fees and expenses related to defending against lawsuits or regulatory actions stemming from a data breach or cyber attack.
• Settlements and Judgments
  Costs related to settling claims or judgments awarded in court cases alleging the business's failure to protect sensitive data.
• Regulatory Fines and Penalties
  Coverage for fines and penalties imposed by regulatory bodies due to non-compliance with data protection laws.

Common exclusions

• Fraud and Criminal Acts
  Deliberate illegal acts or fraud committed by the company or its senior executives are typically excluded. This includes insider threats where an employee intentionally compromises the system.
• Prior Knowledge
  Incidents that occur from vulnerabilities known to the insured before the policy inception, and not disclosed, may not be covered.
• Infrastructure Failures
  Losses resulting from a failure in physical infrastructure, such as power outages or hardware malfunctions that are not the direct result of a cyber incident, are often excluded.
• Wear and Tear
  Standard wear and tear on systems and technology that lead to a security breach may not be covered under Cyber Liability policies.
• Intellectual Property
  Loss of intellectual property rights is generally not covered under Cyber Liability insurance. While a data breach may expose intellectual property, the policy often does not extend to the loss of competitive advantage or market share due to this exposure.
• Breach of Contract
  Cyber Liability insurance usually excludes coverage for claims arising out of contractual liability unless the insured would have been liable in the absence of the contract.
• Bodily Injury and Property Damage
  Traditional Cyber Liability insurance does not cover bodily injury or physical property damage. These are typically covered under other forms of business insurance.
• Future Profit Losses
  Losses related to future profits due to a cyber incident are generally not covered, as they are considered speculative.
• War and Terrorism
  Acts of war, terrorism, and some cyber-terrorist activities, especially those classified by the government as acts of war, are typically excluded from standard policies.

Limits and deductibles

• Per-Claim vs. Aggregate Limits
  Cyber Liability policies may specify per-claim limits, the maximum payout for an individual claim, and aggregate limits, the total payout for all claims within a policy period. Companies face the challenge of choosing limits that adequately reflect their risk exposure and financial capacity to absorb losses. Usually, per-claim and aggregate limits are set at the same level for Cyber Liability insurance policies.
• Factors Influencing Limits Selection
  The appropriate limits for a Cyber Liability policy hinge on several factors, including the company's size, the nature of its data (e.g., personal identifiable information, healthcare data), the potential impact of a data breach or cyberattack, and regulatory requirements. For instance, a healthcare provider handling sensitive patient data may require higher limits compared to a retail business with minimal personal data.
• Small to Medium-Sized Enterprises (SMEs)
  For many small to medium-sized businesses, policy limits may start as low as $1 million and can go up to $5 million. These limits are usually sufficient for covering the potential losses that SMEs might face from a cyber incident.
• Larger Corporations
  For larger businesses or those in high-risk sectors (like healthcare, finance, or technology), policy limits are typically higher, often ranging from $10 million to $50 million or more. These companies face higher risks due to the volume of sensitive data they process or store, necessitating higher limits for adequate protection.

• Balancing Act
  Selecting a deductible is a balancing act between minimizing premium costs and managing out-of-pocket expenses in the event of a claim. Higher deductibles can reduce premium payments but require the business to have sufficient funds to cover this amount in case of a cyber incident.
• Small to Medium-Sized Enterprises (SMEs)
  Deductibles for small to medium-sized enterprises often range from $1,000 to $25,000. Businesses with stronger cybersecurity measures in place may qualify for lower deductibles, as they present a reduced risk to insurers.
• Larger Corporations
  For larger corporations or those in industries with higher cyber risk exposure, deductibles can be much higher, ranging from $50,000 to $500,000 or more. These companies often opt for higher deductibles as a strategy to lower premium costs, leveraging their financial ability to absorb higher out-of-pocket costs in the event of a cyber incident.

Typical cost

• Industry and Business Size
  Businesses in industries handling sensitive data, such as healthcare, finance, and retail, often face higher premiums due to the increased risk of data breaches. Similarly, larger businesses typically incur higher costs than smaller enterprises due to the greater volume of data and more extensive digital infrastructure.
• Revenue and Data Volume
  Companies with higher annual revenues and those that store or process large volumes of personal data can expect higher insurance costs. The potential financial impact of a cyber incident scales with the size of the business and the sensitivity of the data involved.
• Claims History
  A history of prior cyber incidents or claims can significantly affect insurance costs. Businesses with a clean claims record may qualify for lower premiums, while those with a history of breaches or losses may face higher rates.
• Coverage Limits and Deductibles
  The chosen policy limits and deductibles play a critical role in determining the cost of Cyber Liability insurance. Higher coverage limits increase the insurer's risk, leading to higher premiums, whereas higher deductibles can reduce the premium cost but increase out-of-pocket expenses in the event of a claim.
• Cybersecurity Practices
  Insurers often assess a company's cybersecurity measures when determining premiums. Robust security practices, such as regular security audits, employee training programs, and effective incident response plans, can mitigate risk and potentially lower insurance costs.

• Small to Medium-Sized Businesses (SMEs)
  For SMEs, annual premiums can range from as low as $500 to upwards of $20,000 or more. The broad range accounts for variations in industry risk, coverage limits, and other factors mentioned above.
• Larger Businesses
  Enterprises or companies in high-risk industries can expect significantly higher costs, with annual premiums ranging from $20,000 to $100,000 or more. For these businesses, the heightened risk of substantial financial loss due to cyber incidents drives up the cost of insurance.

Useful statistics

• The IBM Security 2020 Cost of a Data Breach Report found that the average total cost of a data breach was ~$4 million in 2020.
• A survey by the Insurance Information Institute in 2020 found that 47% of U.S. businesses reported having cyber insurance, up from 34% in 2017, indicating a growing recognition of the importance of this coverage.

Why have it with Koop?

• Industry Expertise
  Koop understands the unique risks and challenges faced by technology companies. This specialized focus means they can offer policies tailored to the specific needs of tech businesses, such as coverage for software development risks, data breaches, and intellectual property issues.
• Risk Management Automation
  Koop offers integrated compliance and security automation that allows companies to effectively manage contractual requirements, reduce risk through risk controls, and unlock insurance benefits such as insurance discounts and simple renewals. Additionally, the tool saves a lot of time on insurance and compliance tasks.
• Customized Solutions
  Unlike one-size-fits-all policies, Koop provides customizable insurance solutions that can be adapted to fit the unique operational needs of your tech company. Whether you're a startup or an established enterprise, Koop can tailor a policy to match your specific risk profile and business model.

How to get started?

1. Click "Get Started" to create an account on our platform
2. Go in, select Cyber Liability, and fill out an application
3. Get a quote, carefully review it, and hit "Accept"