One of the most significant trends impacting the insurance world is the rise of cybersecurity breaches and the subsequent need for information security protection. Although this is a well-known risk, many companies are not taking the necessary steps to safeguard themselves and their customers from this threat.
According to CyberArk, a global cybersecurity firm, despite 80 percent of corporate board members indicating cybersecurity as a frequent topic of discussion during board meetings, nearly 66 percent of Chief Information Officers and Chief Information Security Officers reported that the senior leaders in their company are not treating this threat as a strategic priority.
As companies take steps to boost profits, some executives might be tempted to forego the costs associated with having the coverages in place to secure the sensitive information targeted by cybercriminals. However, not having cyber liability can ultimately cost the company more in terms of financial losses, reputation damage and a migration of customers.
Cybercrime is on the rise
Not only is the risk of cybercrime unavoidable, it’s also a growing threat for all companies. Reports across all industries are spiking, and many experts expect these to continue to rise, unless the proper security measures are implemented. CyberArk noted that cybersecurity incidents overall have risen by 38 percent over the past year.
“Cybersecurity incidents overall have risen by 38 percent over the past year.”
Specifically, Reuters reported that the Department of Homeland Security’s Industrial Control Systems Cybersecurity Emergency Response Team recorded a surge in cyberattacks against the nation’s critical manufacturing sector in the year spanning from Sept. 30, 2014 to 2015. The ISC-CERT responded to 265 cyberattacks in this sector, a 20 percent increase over the previous year. Following this industry were energy, water and transportation, with 46, 25 and 23 incidents respectively.
While these companies are vulnerable to the theft of trade secrets, business data and other company financial data, organizations that host sensitive customer information are much more vulnerable to a data breach since this puts the public as well as the company at risk.
The assorted costs associated with cybercrimes
Although cybercriminals target digital systems and networks, the ramifications of these crimes have very real and very costly long-term impacts on both the company and those who do business with that company.
As noted by The National Association of Insurance Commissioners, there’s a long list of cyber threats that businesses face in today’s digitalized world, including:
- Identify theft stemming from a security breach where either a hacker steals sensitive information or a company inadvertently disseminates it, whether that be credit card numbers, Social Security numbers, personal identification numbers, driver’s license numbers, birth dates or other financial data.
- The financial burden associated with the damage caused to the network.
- A denial of service attack on a company’s website.
- Theft of customer lists, business trade secrets and other proprietary information.
- Ruination of the company’s reputation.
- Malware, viruses, worms and other malicious computer code entered into the business’ systems.
- The expenses associated with ensuring those people affected by the security breach in terms of purchasing credit monitoring or other compliance services.
- The legal costs for defending against lawsuits for people.
There are several proactive ways businesses are attempting to thwart these cyberattacks, including:
- Implementing stronger security protocols and standards for third-party vendors.
- Responding to and staying up to date with rapidly evolving, sophisticated and complex technologies.
- Protecting customers as they increasingly utilize mobile technologies.
- Heightening information security threats and data exchanges across the border.
With the proper protections in place, these cyberattacks can be costly, no matter which form they take. According to Bloomberg BNA, data breaches are costing organizations roughly $6 million per incident on average. As digital delinquents become more sophisticated and utilize more advanced illegal devices and strategies, it’s imperative that companies have the proper protections in place to safeguard their systems.
Government regulation tightening
In addition to the looming threat of cyberattacks, government regulators are also increasing their purvey and boosting compliance regulations as well. As noted in Bloomberg, although each state has regulations requiring companies who have had a data breach to disclose this information to their state’s attorney general, pending federal legislation is coming down the pipeline that would overrule this. While the Federal Trade Commission has historically been the agency dedicated to this issue, the Food and Drug Administration and the Securities and Exchange Commission are both also creating new regulation aimed at combating cybercrime.
Partnering with McGowan
While the risk of cybercrime is unfortunately a reality, there are ways companies can safeguard themselves and their clients. However, when a data breach does occur, it’s important that companies have the right protections in place to assist with the inevitable regulatory actions as well as any potential lawsuits made by a consumer seeking damages.
Brokers who partner with McGowan Risk Specialists gain the experience of a trusted wholesale brokerage that focuses on the placement of cyber liability products. With the proper technology liability insurance in place, businesses know they won’t be decimated by a cyberattack.