TAMPA BAY, Fla., May 7, 2014 /PRNewswire-iReach/ -- Cyber-attacks are draining as much as $140 billion and half a million jobs from the U.S. economy each year (1). Only recently have companies and insurance providers begun to take notice of the significant financial liabilities that accompany cyber-attacks. While Target lost their CIO and CEO due to the fallout, Michaels took four months to admit evidence of a breach (2-4). Bob Childress, CEO of Solace Insurance and long-time industry veteran, says that cybercrime not only presents a significant threat to a company's financial stability, but also presents an indirect and even fatal hard loss in the form of reputational damage. The Tampa Bay-based insurance agency deems cyber insurance to be one of the fastest-growing segments of the industry.
Nearly 90 percent of U.S. organizations consider cyber-attacks to be their greatest risk; according to PricewaterhouseCoopers' 2014 Global Economic Crime Survey, U.S. businesses were hit harder financially by cybercrime relative to other countries in recent years: 19 percent of U.S. organizations lost between $50,000 and $1 million, compared with just 8 percent of global respondents (5). Target's data breach alone resulted in $17 million of net expenses, with $61 million of total expenses partially offset by the recognition of a $44 million insurance receivable (6).
The damage done by just one security breach can bring a small-to-medium-sized enterprise to financial ruin; almost 60 percent of small businesses that are hit by cyber-attacks close within six months of the breach. Despite heavy emphasis placed on quantifiable financial damages, Childress says companies blatantly foregoing cyber insurance are increasingly vulnerable to harmful publicity; 66 percent of businesses in the retail sector deem reputational risk to be one of the top cyber risks (7).
Childress asserts that one of the biggest expenses associated with data breaches is repairing public trust via public relations initiatives—and also one of the biggest areas that businesses don't address, with many failing to realize the large effort this can entail once public trust has been violated.
"Consumers are quick to lose trust in a company that fails to protect their sensitive information, and changing their minds necessitates strategic public relations plans that can be costly," said Childress. "Cyber insurance provides a safety net that negates those costs and helps businesses repair their reputation."
Cyber insurance has been deemed the answer to business continuity plans because it assists them in preserving their current financial position in lieu of a cyber-attack by reducing the financial losses with regard to cyber extortion, public relations to repair the insured's reputation, and expenses occurred by violation of consumer privacy protection laws.
"Compromised or lost data is just the tip of the iceberg—the real risk lies in the resulting scrutiny, ebbing consumer trust and litigation that stunts many businesses financially," Childress stated. "Cyber coverage offers a safeguard that helps avoid those consequences."
Because coverage availability and premiums vary between insurers, Childress suggests that business owners do extensive research to understand the potential security risks and types of coverage needed. While standard policies may provide some protection from cyber risks, per Childress, it is important to understand what coverage, if any, may be available under current policies:
- Determine whether coverage is provided under existing policies. General liability policies sometimes provide some protection from cyber-attacks, but additional cyber insurance policies are typically required to ensure that there are no gaps in coverage.
- Prepare for potential costs of a data breach. Cyber-attacks often result in significant costs; obtaining coverage equal to the risk in the event of a breach is critical. One should contact an insurance professional regarding the coverage available for various risk factors.
- Find out if there are exclusions. If a policy is unclear or contains an improper exclusion, negotiate the agreement or seek assistance from a different agency.
Childress states that a growing segment of his business is ensuring that SMBs are protected against the inevitable cyber-attack.
For more information about Solace Insurance, visit www.restinsured.com.
About Solace Insurance:
As an independently-owned, full-service agency based in Tampa Bay, Florida, Solace Insurance has over $1 billion in property insured and has provided quality insurance products to customers for over 30 years. Solace is a licensed insurance agency within the top two percent in technology use for agencies nationwide. The company also holds Premier Partner designations with multiple carriers. This status is what allows Solace to offer its customers the most competitive and economical programs available, all while providing expert advice and quality service. From standard auto policies to the more complex multi-tiered insurance programs for home and business, Solace has the depth of resources to find the right policy tailored to each individual and/or company. CEO of Solace, Bob Childress, is one of the twelve agency advisors on the Agent Technical Council in the US for Progressive Insurance. For more information, visit Solace online at www.restinsured.com.
1. Dave, Paresh. "Cybercrime Costs U.S. Economy up to $140 Billion Annually, Report Says." Latimes.com. Los Angeles Times, 22 July 2013. Web. 29 Apr. 2014. articles.latimes.com/2013/jul/22/business/la-fi-tn-cybercrime-140-billion-dollars-economy-20130722.
2. Hadley Malcolm, "Target CEO out as data breach fallout goes on," USAToday.com. Web. 5 May 2014. usatoday.com/story/money/business/2014/05/05/target-ceo-steps-down/8713847/
3. Jeffrey Roman, "Target Hires New CIO, Bob DeRodes to Lead Company's Post-Breach Security Efforts," Databreachtoday.com. 29 April 2014. Web. databreachtoday.com/target-hires-new-cio-a-6799
4. Elizabeth A. Harris, "Michaels Stores' Breach Involved 3 Million Customers," NYTimes.com. 18 April 2014. Web. nytimes.com/2014/04/19/business/michaels-stores-confirms-breach-involving-three-million-customers.html?_r=1
5. Thompson, Cadie. "What Cyberthreats Are Costing US Companies." CNBC.com. N.p., 20 Feb. 2014. Web. 18 Apr. 2014. cnbc.com/id/101429224.
6. D'Innocenzio, Anna. Yahoo!, 26 Feb. 2014. Web. 17 Apr. 2014. news.yahoo.com/data-breach-costs-toll-target-profit-123047290--finance.html.
7. Bender, Hannah. "Retail Shortfall in Assessing Cyber Threats: Willis." N.p., 24 Apr. 2014. Web. 25 Apr. 2014. propertycasualty360.com/2014/04/24/retail-shortfall-in-assessing-cyber-threats-willis?eNL=53597776160ba05a0f3905d5&utm_source=PC360DailyeNews&utm_medium=eNL&utm_campaign=PC360_eNLs&t=coverage-policy-issues&_LID=72313830.
Karla Jo Helms
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