In the aftermath of the Target data breach and OpenSSL Heartbleed security flaw, many clients will want their IT consultants to make sure their data is protected. However, according to research from the Ponemon Institute, many businesses – one third of them – don't consult with their IT contractor to determine the adequacy of their Data Breach Insurance (also called Cyber Liability Insurance).
This is significant because clients might…
- Have inadequate data breach coverage.
- Underestimate the risks posed to their data security.
- Sue their IT consultants to make up for the damages they incur after a data breach.
Read on to learn how you can counsel your clients in their Cyber Liability Insurance decisions.
How Data Breach Insurance Protects Your Clients
Data Breach Insurance is an important way for clients to protect their financials and their reputation from the aftereffects of a data breach. Depending on the provider, it might provide funds to…
- Contact customers.
- Monitor customers’ credit.
- Investigate the breach.
- Hire crisis management experts.
For a client whose data has been hacked, this insurance can help prevent identity theft lawsuits while making sure the client fulfills their legal obligations to inform customers and file reports with the proper state authorities.
As we've seen with the rash of data breaches early in 2014, companies lose a lot of time and spend a lot of money to minimize the damage of a cyber attack. Unfortunately, many clients don't understand what a data breach really is and all the expenses that come with it.
Clients might have a vague idea that breaches lead to identity theft, but they won't have an overarching understanding of how their data protection practices and insurance protection work together to protect their company from cyber liability.
As an IT professional or security consultant, you can offer a service to help your clients understand the risks to their data and analyze whether their insurance adequately protects them.
How a Client's Cyber Liability Insurance Can Protect You
One of the most shocking things about data breaches is how expensive they are. Another report from the Ponemon Institute and Symantec estimates that businesses spend $188 on average for each record of private data involved in a breach.
If a client's data breach involves 5,000 customers, Symantec estimates this could cost the client almost $1 million. If a client isn't properly insured for such a cyber attack, they could sue you , their IT consultant.
If you have Errors and Omissions Insurance, your policy covers these client-side data breach lawsuits. But of course, it's better for you if there are no lawsuits in the first place. Making sure clients have strong security practices and adequate Data Breach Insurance can wind up protecting you from a client dispute or a lawsuit.
Small Business Insurance Benefits Client / Consultant Relationships
One of the benefits of small business insurance policies, such as Cyber Liability or Errors and Omissions Insurance, is that they facilitate client relationships. Many clients (especially larger ones) require their IT consultants to have E&O Insurance.
This policy reassures clients that an insurance company is standing behind your work. If there's a mistake in your code or a vendor's product causes a data breach, clients want to know that your insurance company can pay for the damages.
Similarly, if your clients have Data Breach Insurance, you'll know that they take their data security seriously and will have the financial backing of an insurance company to help them survive a data breach.
To learn more about any of these coverages, or to get a free insurance quote, contact a TechInsurance agent today.