A new study from the Ponemon Institute shows that many companies are ready to invest in a Cyber Liability Insurance policy, but may need a push from their IT consultants. According to the research, 39 percent of companies don't have Cyber Liability Insurance (also called Data Breach Insurance) but plan to get coverage.
As an IT consultant, you should encourage your clients to make this plan a reality. Why? For one thing, it’s your responsibility to help your clients mitigate their cyber risks. But you can also indirectly benefit from your clients’ insurance protection. Read on to learn how.
Do IT Professionals Need Data Breach Insurance?
By now you might be thinking, “Wouldn’t it be better to purchase Data Breach / Cyber Liability Insurance for myself instead of encouraging my clients to?” Indeed, with all the recent data breaches (see "Personal Data Theft Up 82% in Last 6 Months" for more on this), Cyber Liability Insurance probably sounds like a good investment. But that’s usually not the case.
It might sound strange to hear an insurance company like us tell you this, but for many IT businesses, Cyber Liability Insurance just doesn't make sense. Generally speaking, it's a policy that's better suited for your clients.
That’s because Cyber Liability Insurance covers costs associated with "first-party data breaches," which are the attacks that happen directly on a business's own network. You probably already see why this is an issue for IT firms. Most techies aren't as worried about their own data as they are about their clients’ data. This is simply because most IT contractors have much less private data than their clients do.
That being said, some IT businesses do have a lot of private data on their networks (web hosts and database administrators for instance), and those businesses would benefit from Cyber Liability Insurance. But for most IT companies, it's more important to make sure that their clients are the ones with the protection.
How Tech Professionals Benefit from Their Clients’ Cyber Liability Insurance
In order to understand how your clients’ Cyber Liability Insurance can benefit you, let’s take a look at what the coverage does. In the event of a data breach on a business’s network, Cyber Liability Insurance helps that business pay for the related expenses, including…
- The cost of informing customers about the breach.
- Credit monitoring to prevent identity theft and fraud.
- Crisis management and hired PR firms to help the client respond to the breach.
Don’t underestimate how expensive a data breach can be. Symantec reports that an average data breach costs over $180 per lost record. In other words, if your client’s data breach involves 10,000 records, security experts estimate the cost to be around $1.8 million.
The absurd cost of a data breach and the ongoing damage to business reputations means clients often sue their IT contractors – especially if they don’t have the insurance in place to foot the bill. In order to recoup these losses, your clients (and their lawyers) target you, claiming that it’s your job to prevent these incidents.
While your Errors and Omissions Insurance covers the cost of lawsuits when you’re sued over a data breach on a client’s network, it's good to think about minimizing your clients' financial risk too. Cyber Liability Insurance can cover a client's data breach expenses, which means they will be less likely to sue you after an attack.
A Last Word about Cyber Insurance
Remember that security consultants and network administrators are responsible for managing their clients' data security risk. While you think about malware threats and other IT issues, consider the financial and legal risks as well.
Make sure you plan for these risks, cover your liabilities, and help your clients cover theirs. For more information about any of these policies, contact a TechInsurance agent.