Cyber Insurance for Technology Companies Guide to Security

As a technology company, you're likely no stranger to the risks of cyber threats. Cyber attacks can happen to anyone, and the consequences can be devastating, with 60% of small businesses going out of business within six months of a cyber attack.

The first step in protecting your business is to understand the types of cyber threats you face. Ransomware, phishing, and malware are just a few examples of the many types of cyber threats that can compromise your business.

Cyber insurance, also known as cyber liability insurance, is a policy that covers financial losses a business may face following a security breach or other cyber event.

It's a type of insurance that transfers the costs of a cyber incident to your insurance provider.

A security breach or cyberattack can happen to any business, regardless of size or industry.

Sony's PlayStation network experienced a major data breach in 2011, with cybercriminals stealing the personal information of several million gamers.

This breach cost Sony approximately $170 million and forced them to shut down their network for almost a month.

Sony thought their general liability insurance policy would cover the costs, but they were wrong.

In 2014, Sony had a cyber insurance policy in place that covered the estimated $100 million they lost from another breach.

Data breaches are now at an all-time high in the US, with a nearly 20% increase in the first nine months of 2023 compared to all of 2022.

In 2023, the FBI's Internet Crime Complaint Center received a record 880,418 complaints nationwide, with potential losses exceeding $12.5 billion.

On a global scale, cybercrime is expected to cost $9.5 trillion this year, with projected damages reaching $10.5 trillion by 2025.

Given these statistics, it's no surprise that cyber insurance protection is becoming increasingly important for tech companies to manage the financial repercussions of cyber incidents.

As a startup founder, you're likely no stranger to wearing multiple hats and juggling multiple responsibilities. That's why cyber insurance is particularly important to you, providing peace of mind and financial protection against the potentially crippling costs of cyber incidents.

Cybercrime has increased exponentially in recent years, and that trend is expected to continue in the coming years. According to an Apple-commissioned study, data breaches are now at an all-time high in the U.S.

As a CTO, you're responsible for overseeing your company's technology infrastructure and cybersecurity measures. You may also play a role in choosing coverage for various cyber risks that complements your efforts in designing and implementing digital defenses.

The FBI's Internet Crime Complaint Center's annual Internet Crime Report indicates that a record 880,418 complaints were received nationwide in 2023, and potential losses exceeded $12.5 billion. That's a nearly 10% increase in complaints and a 22% hike in losses compared to 2022.

If you're a risk management executive, you know that cyber risks are among the most significant a tech business faces – especially given the regulatory requirements for data protection and cybersecurity. A cyber insurance policy can help you navigate these risks and provide financial protection and support in the event of a cyber incident.

Cyber threats are constantly evolving, and tech companies need to be aware of the types of cyber threats they may encounter. Among the cybercrimes that business owners need to be aware of is the rise in attacks involving business email compromise (BEC) and business communication compromise (BCC).

In 2023, BEC was among the costliest cybercrimes in the U.S., with $2.9 billion in reported losses. Ransomware attacks also rose again in 2023, with the median ransom payment reaching $2 million, up substantially from the median payment of $400,000 reported in 2023.

Other cyber threats that tech companies need to be aware of include third-party exposure, DNS tunneling, insider threats (intentional and unintentional), state-sponsored attacks, and cloud vulnerabilities.

Here are some common types of cyber threats that tech companies may face:

Cyber threats are a major concern for tech companies, with cybercriminals constantly finding new ways to infiltrate networks. BEC and BCC attacks are on the rise, with cybercriminals using AI tools and deepfake capabilities to deceive individuals into performing actions such as transferring money or sharing sensitive data.

Ransomware is another financially cumbersome cyber incident, with the median ransom payment reaching $2 million in 2023. Emerging trends in ransomware involve deploying multiple variants against the same victim and using data-destruction tactics to increase pressure on victims.

Third-party exposure, DNS tunneling, insider threats, state-sponsored attacks, and cloud vulnerabilities are also significant cyber threats that tech companies need to be aware of. These threats are constantly evolving as cybercriminals leverage new technologies to target organizations.

Here are some common types of cyber threats that tech companies face:

These threats can have significant financial and reputational consequences for tech companies, making it essential to regularly assess cyber risks and take steps to control and mitigate them.

First-party cyber insurance is a must-have for any business that handles digital data. It protects against losses that are the direct result of a cyber event, covering expenses like data recovery, notification costs, and forensic investigation.

First-party cyber insurance can cover a wide range of expenses, including:

On the other hand, third-party cyber coverage protects your business from claims made against it by third parties, such as clients, customers, and partners. This coverage handles costs related to settlements, legal fees, and regulatory fines.

Here's a breakdown of the key differences between first-party and third-party cyber coverage:

First-party cyber liability insurance can cover expenses related to incident response, including notifying clients or customers about a breach and credit monitoring services for affected clients.

First-party cyber insurance protects tech companies from losses that are the direct result of a cyber event, covering expenses like data recovery, notification costs, and lost income due to business interruption.

Third-party cyber coverage, on the other hand, protects your business from claims made against it by third parties, such as clients, customers, and partners, handling costs related to settlements, legal fees, and regulatory fines.

First-party cyber insurance is essential for any business that handles digital data, as it covers expenses that may arise if their network is compromised. Third-party cyber liability insurance is usually bundled with errors and omissions insurance, protecting against accusations of negligence.

Here's a breakdown of the types of coverage:

First-party coverages are designed to protect your business from the direct costs of a data breach or cyberattack. This type of coverage can help you recover from a cyber event by covering expenses such as notifying customers, providing credit card monitoring, and hiring a public relations consultant to restore your company's reputation.

Some first-party policies may also cover additional expenses, such as the cost of crisis management services, payments made to a cyber extortionist, and income lost due to a data breach.

Here are some examples of first-party expenses that may be covered:

According to a study from the IBM | Ponemon Institute, data breaches can cost businesses an average of $242 per stolen record, which can add up quickly. For a small business storing data for 1,000 customers, this could mean paying nearly a quarter million dollars to recover from a breach.

Third-Party Coverages are a crucial part of cyber insurance that protects your business from claims made against it by third parties, such as clients, customers, and partners.

Third-party insurance covers the cost of defending and settling lawsuits against your business by people whose information has been compromised in a data breach. For instance, suppose a hacker steals customers' credit card numbers from your computer system. If a customer sues you for failing to secure their information, your cyber liability insurance should cover the resulting damages or settlement costs and legal expenses.

Third-party coverage may also apply to fines or penalties levied against you by a regulatory agency, such as the Federal Trade Commission, for failing to comply with data breach laws. This type of coverage is essential for businesses that handle sensitive data, as it can help you avoid financial ruin in the event of a data breach.

Here are some examples of claims covered by third-party cyber insurance:

It's worth noting that third-party cyber coverage usually bundles with errors and omissions insurance, which protects against accusations of negligence. This package is called technology errors and omissions insurance, or tech E&O.

You'll want to read the policy thoroughly to understand the terms and conditions, and ensure you have the right coverage based on your company's unique needs and risk profile.

The cost of cyber insurance will depend on the type of company you operate and its exposure to cyber threats. Factors that may impact cyber insurance policy premiums include company size, amount and sensitivity of data, annual revenue, existing cybersecurity measures, coverage limits, and deductible.

Knowing your company's cyber risks is an important part of ensuring you get the right coverage with an insurer that will provide protection tailored to your organization's specific needs.

Cyber insurance costs can vary significantly depending on the specific factors mentioned above. For example, a plumbing contractor will likely pay less than an investment services company.

Here are some examples of cyber insurance costs for tech companies:

A straightforward claims process or dedicated claims assistance for cyberattacks is also an important consideration when choosing a cyber insurance policy.

Cyber insurance can cover a wide range of claims, including those related to data breaches, cyber attacks, and employee mistakes.

One example of a covered claim is when a disgruntled former employee hacks into your computer system and corrupts all of your employee and customer records. This can be a costly and time-consuming issue to resolve.

Third-party coverage can also help protect your business in the event of a data breach. If a hacker steals customers' credit card numbers from your computer system, your cyber liability insurance should cover the resulting damages or settlement costs and legal expenses.

Here are some scenarios that may be covered by cyber insurance:

Our dedicated claims support team is available 24/7 to help you navigate a breach with swift response and rapid recovery. They're ready to assist you at a moment's notice, ensuring your business stays on track.

Having a trusted partner in cyber insurance can make all the difference in the event of a data breach. Our expert claims team will work tirelessly to help you resolve the issue.

You'll have access to support whenever you need it, whether it's day or night, 365 days a year. This means you can focus on getting back to business as usual, rather than worrying about the claims process.

Third-party coverages, such as defending and settling lawsuits against your business, are also covered by our cyber liability insurance. This can include costs associated with damages or settlement, as well as legal expenses.

Our expert claims team is available 24/7 to help you navigate a breach with swift response and rapid recovery.

We cover a wide range of cyber-related claims, including those caused by disgruntled former employees, data breaches, and ransomware attacks.

Here are some examples of claims covered by cyber insurance:

These scenarios illustrate the importance of having comprehensive cyber insurance coverage to protect your business from various cyber threats.

Our cyber liability insurance covers the cost of defending and settling lawsuits against your business by people whose information has been compromised in a data breach.

A data breach can be a costly affair, with the average cost per stolen record being $242, according to a study from the IBM | Ponemon Institute.

If a hacker exploits a system vulnerability and steals sensitive data, you could be held liable, which is where cyber liability insurance comes in. This type of insurance can cover expenses from a client lawsuit and other costs related to the security breach.

First-party cyber liability insurance covers cybercrimes at your own business, including ransomware attacks that steal clients' credit card numbers from a managed service provider's database. This can include expenses related to incident response, such as notifying clients or customers about the breach.

Notifying clients about a breach can be a significant expense, especially if you're mandated by state law to do so. The cost of notifying customers can be nearly a quarter million dollars for a small business storing data for 1,000 customers.

Third-party cyber liability insurance protects your business from expenses related to a client's lawsuit, such as attorney's fees, court costs, and settlements or judgments.

Here are some examples of what third-party cyber liability insurance can cover:

It's worth noting that technology, web, and IT businesses that need third-party cyber coverage often bundle it with errors and omissions insurance, which protects against accusations of negligence.

Cyber insurance is a must-have for technology companies, and here's why: it protects businesses from financial losses caused by data breaches and other types of cyberattacks.

Many cyber policies cover direct expenses, such as the cost of replacing lost data and settling and defending lawsuits. This can be a huge relief for businesses, as these costs can add up quickly.

You should consider buying cyber insurance if your business uses laptops, smartphones, or other computer technology. This is because almost any business that uses technology is vulnerable to a cyberattack.

A cyber policy can pay many of your expenses, such as the cost of notifying customers and reconstructing lost data. It will also cover settlements and legal costs resulting from lawsuits.

The cost of cyber insurance is relatively affordable, with many small businesses able to buy a policy for about $1,740 per year.