Cybersecurity breaches are consistently increasing in frequency, and businesses, especially those who handle sensitive information, need to be prepared. Virtually everyone employs safety measures such as firewalls and anti-virus software as the first line of defense. However, when a breach does occur, your business may incur financial losses and be liable for any damages to third parties. Cybersecurity insurance can protect your firm from the fallout of a data breach, mitigating losses and damages.
What Does Cybersecurity Insurance Cover?
Like any insurance, cybersecurity coverage varies greatly depending on your policy. In general, cybersecurity insurance covers the cost of responding to a cyberattack such as hiring digital forensic experts to determine the scope of the attack, regulatory expenses and fines, and crisis management costs. If your business operations are compromised due to a breach, cybersecurity insurance may cover most of your losses. The value of stolen intellectual property as well as cybersecurity infrastructure upgrades after an attack are not covered under most policies. Depending on your policy, cybersecurity insurance may shield your business from liability after a breach and save your firm from litigation. Cybersecurity insurance should be a key part of your firm’s cyber incident response plan.
Who needs Cybersecurity Insurance
General liability insurance does not typically extend to cyber incidents, which makes the addition of cybersecurity insurance important for every industry. Specific industries that may benefit the most include legal, financial, and healthcare services. Firms in these industries typically store large amounts of sensitive data, such as banking, personal, and medical information, making them prime targets for a cyberattack.
In June 2021, Stevens & Lee, a midsized Philadelphia law firm serving financial institutions, suffered a data breach compromising over 300 clients’ data. However, it was later revealed that over 23,000 people’s data was potentially compromised, including customers of the financial institutions the firm represents. This breach spanned multiple states and exposed information such as names, social security numbers, and account and card numbers. In this case, and many others, cybersecurity insurance can help cover the costs of the breach and protect firms from litigation.
Rising Costs
While cybersecurity insurance is essential for mitigating potential financial damage, it may not be affordable for every business. Due to the significant rise in cyberattacks and increasing demand for coverage, small to midsize firms may be shocked at the skyrocketing prices of insurance premiums. In fact, premiums increased 28% in Q1 2022 compared to Q4 2021 and are expected to rise even more.
Many insurers expect their policyholders to have significant cybersecurity measures in place such as employee cybersecurity training, strong password and multi-factor authentication policies, 24x7x365 monitoring, and more. Insurance companies may also silently stress test the cybersecurity of their policyholders and grade them accordingly. Lower grades may mean higher rates or even a refusal of policy renewal, while higher grades can result in lower premiums and monthly costs. For small to midsized firms who handle their own IT, acquiring a favorable rate may be a challenge.
Mitigating Risk
Effective cybersecurity measures are essential, not only to secure a cybersecurity insurance policy, but also to keep your firm, your clients, and your partners safe. Small to midsize law firms may not have the resources to implement state-of-the-art cybersecurity solutions but partnering with a managed IT service provider (MSP) can alleviate this issue.
MSPs specialize in cybersecurity and have the resources and expertise to do more for your IT. In addition to implementing advanced security measures, a good MSP will offer your employees cybersecurity training, perform security audits, constantly monitor for red flags, and much more. While an MSP is not a substitute for cybersecurity insurance, a reputable MSP will ensure that your firm meets and exceeds any cybersecurity insurance requirements.
Leveraging your IT
With comprehensive cybersecurity measures in place, your firm can leverage your security as an attractive selling point. Clients and partners may be hesitant to trust their sensitive information to a firm without strong cybersecurity practices and insurance, especially a small to midsized firm. However, a partnership with an MSP and a high grade from a cybersecurity insurance policy will enable your clients to feel safe and trust that their information is secure with your firm. With an MSP handling your IT, your firm can focus on the needs of your clients.
Tabush Group is a leading provider of Cloud and Managed IT services and a strategic IT partner for small and midsize firms. To learn more about how our state-of-the-art IT solutions can make your firm’s operations more efficient and secure, contact us.