What Does Data Breach Insurance Cover?

It is so important that the insurance market adapts to counter the new wave of cybercrime and protect businesses from the havoc cyber criminals can wreak.

Data breach insurance coverage is an important element of any cyber insurance policy; but what is a data breach, and why is this insurance coverage component so important for companies in all sectors of commerce and industry?

Key Points

  • Data breach insurance protects businesses from financial losses caused by data breaches.
  • This type of cover supports notification costs, credit monitoring services, legal fees, forensic investigation and public relations expenses.
  • Any business that collects and stores sensitive customer and third-party information should consider data breach insurance.

What is data breach insurance?

Data breach insurance, also sometimes referred to as cyber liability insurance, protects organisations from the financial losses commonly associated with data breaches resulting from a cyber attack.

It helps cover businesses’ costs and expenses after a data breach, including providing credit monitoring services, notifying those affected by the cyber attack, legal fees incurred and potential penalties and fines imposed by regulatory bodies.

What’s the difference between cyber insurance and data breach insurance?

Although the terms cyber insurance and data breach insurance are often used interchangeably, there are subtle differences between them.

  • Cyber insurance is a broad term that covers all aspects of cyber attacks, such as data breaches, ransomware, hacking and other online threats.
  • Data breach insurance is an element of a cyber insurance policy that covers the costs typically associated with cyber breaches, including credit monitoring, notification expenses and any legal fees.

What does data breach insurance cover?

Data breach insurance coverage usually covers the following:

Notification expenses

Notification expenses are costs incurred for notifying all parties affected by the data breach, including clients, company employees and third-party suppliers.

Credit monitoring services

Credit reports monitor affected parties’ accounts for signs of fraudulent activity, such as new accounts or loans opened in their name without their knowledge or consent. The cost of credit monitoring services is often covered by the data breach component of a cyber insurance policy.

Legal fees

This element of the cyber insurance policy covers expenses related to legal defence, judgments and settlements resulting from the data breach.

Forensic investigation

Costs associated with investigating the extent and causes of the data breach and cyber attack are covered.

Public relations

When a business suffers a cyber attack and data breach, the public relations fallout can be catastrophic. The policy’s data breach element covers any expenses related to managing PR.

Example of a data breach claim

In October 2020, the ICO fined British Airways for a data breach that affected over 400,000 customers. In that case, the stolen data included both financial and personal information. 

Fortunately for BA, their data breach insurance covered the costs of notifying all affected parties, providing credit monitoring services, hiring a forensic investigator to determine the extent of the breach, and settling any legal fees associated with the incident.

Why is data breach insurance important?

Data breach insurance coverage is crucial because cyber attacks can be extremely costly for businesses. Your company could be liable for legal fees, regulatory fines, reputational damage and other financial losses resulting from such a breach. This insurance coverage element helps mitigate these risks by offering financial protection and support in the event of a cyber attack.

How can your business prevent a data breach?

Of course, preventing a data breach is much better than dealing with the aftermath. Here are some key steps that may help to prevent an attack on your network, resulting in a data breach:

  1. Put in place strong cybersecurity measures, including antivirus software, firewalls and encryption.
  2. Keep your systems and software regularly updated.
  3. Provide cybersecurity training to your staff members to help them spot phishing scams and other cyber threats and know how to avoid them.
  4. Allow access to sensitive data only to employees who need it to perform their roles.
  5. Develop and implement a data breach response plan to react quickly and effectively in the event of a cyber-attack or data breach.

Who needs data breach insurance?

Any company that:

  • Collects and stores customers’ personal and financial data
  • Holds online employee records
  • Holds company financial information

… should have data breach insurance in place.

Businesses that are liable to data breach notification legislation might also be legally required to have data breach insurance.

Data breach insurance with Stanmore

Regardless of your business’s industry sector, your company could be in danger of an attack by cybercriminals, and data breach insurance is a vital element of your cyber insurance policy. 

Data breach insurance coverage helps protect your business against the costs associated with online crime, can mitigate financial losses, repair reputational damage and restore customer trust.To find out more about data breach insurance, contact our helpful team of experts here at Stanmore Insurance today.