Is Your Small Business Ready for a Data Breach?
A data breach is a sudden event which occurs when personally identifiable information is compromised. Hackers, a faulty transaction, malfunctioning technology, simple human error and lost or improperly disposed data can be the culprit. If you collect personal information, consider what cyber liability insurance has to offer!
The effects of data breaches on your small business could be devastating. Not only will you be responsible for credit monitoring for anyone affected, but analysis into how the data breach occurred and steps to avoid another occurrence can be costly and time consuming.
Ponemon Institute studies data breaches. In 2013 this annual study estimated an average post-breach cost of $188 per record. Although this includes $124 in lost business cost, the remaining $64 of actual remediation cost per record can add up quickly.
Data breaches occur every day. Hacking incidents are the most recognizable and expensive cause of data loss, yet they are not the most common. Three out of four incidents result from human error!
- 40% of the data breach cases are from people making mistakes, such as losing laptops and flash drives.
- 36% are system glitches, such as software updates, which inadvertently expose sensitive private files.
- 24% are malicious and criminal attacks.Here are just a few examples of how a breach of information can occur and how much remediation would cost without proper coverage:
Cyber-liability policies may also provide coverage for liability claims for:
- spreading a virus
- spreading a malicious code
- computer theft
- unintentional act
- omissions made by your employees while performing their jobs
- A restaurant experienced stolen personal identification credit card numbers on a hacked server.
- Number of records: 1,800
- Estimated costs at $64 per record = $115,200
- Retail store mistakenly dumped sensitive client information into garbage containers behind its facility. The records included credit card account numbers, names, addresses and telephone numbers of employees and customers.
- Number of records: 4,000
- Estimated costs at $64 per record = $256,000
- A laptop with employee information stolen out of a parked car.
- Number of records: 4,300
- Estimated costs at $64 per record = $275,200
Important statistics/facts your small business should know about
- According to Visa, 85% of data breaches occur at the small business level
- Shred-it, an information security company, found 41% of small business owners have no secure data protocols
- “When we look back at the higher education data breaches in 2012, we can see that the hackers are clearly getting smarter at stealing data,” states Alex Rothacker, Director of Security Research, AppSecInc’s TeamSHATTER
- Ponemon Institute reported the total cost per company from a data breach was more than $6.75 million
- The HITECH Act and FTC requires you to notify your clients when the security of their health information has been breached; Health and Human Services requires HIPAA-covered entities, such as hospitals, doctors’ offices, and health insurance plans, to notify individuals of a security breach.
Cyber Liability Insurance May Include
- Various Limits available: $500,000, $1,000,000, etc
- Retentions range: $5,000 to $25,000; are scaled based on revenues
- Full limit for breach notification costs
- Full limit for computer forensics
- Duty to Defend policy
- Coverage for breach of contract claims, including those under a payment card processing or service provider agreement
- Medical or healthcare fields are covered on our special healthcare privacy form, with wording taken directly from HIPAA HITECH to help ensure coverage triggers properly
- Coverage for regulatory actions, including investigations by the FTC or state attorneys general, as well as coverage for civil penalties (where allowed), and compensatory awards such as consumer redress funds
- $25,000 of PCI Fines coverage included at no additional premium
- Ability to add complementary coverages such as:
- Multimedia Liability
- Hacker Damage
- Cyber Business Interruption
In the event of a data breach, are you prepared to handle your customers in addition to your daily operations?