When a company considers purchasing cyber insurance, they often consider the likelihood and financial impact they would incur in responding to a breach of confidential information (e.g. credit card numbers, healthcare records, etc.). Often times the conversation ends here and a company declines cyber coverage without considering the rest of the exposures and coverages a cyber policy can provide.
The greater risk for some businesses comes from the reliance they have on their network and software applications simply being up and running. The income loss and extra expense they incur from a cyber attack causing an outage to their network and/or corrupting their software and critical business information can be catastrophic. This is what the business interruption and data restoration coverages within a cyber policy can address.
These days, all kinds of businesses, from small retailers to large manufacturers, rely on software and network services to keep their business running smoothly. In some cases, that software is housed internally, and in others, some of it may be hosted by a third party provider.
In either case, if the network is hijacked, goes down, or is corrupted, it can cause significant financial loss to the business, which can have both short and long-term consequences. And that’s why it is so important for businesses to have cyber insurance that includes business interruption and data restoration coverage.
No Cupcakes for You Today
To illustrate what can happen when a company’s network gets interrupted, corrupted or hijacked by a hacker, malware, or perhaps a disgruntled employee, let’s look at what might happen to a simple bakery:
When the bakery’s network goes down, they could lose the ability to take online orders, process cards in their store, take orders using their electronic system, or access orders they have scheduled. If their mixers and ovens are connected to or operated through an electronic network, they may not even be able to make their cakes, pastries and other baked goods. Separate from the actual interruption to the network, their recipes, oven settings, customer lists and supplier information could all be wiped out or at the very least corrupted.
Customers that come by to purchase baked goods and are unable to may go to another bakery, and the longer that interruption lasts, the less likely those customers are to return. Meanwhile, the bakery is scrambling to get their systems back up, or find an alternative method to make their products - which might include renting or buying more ovens, and paying for new software or emergency IT services. Additionally, they may need to work with an IT forensic firm to restore their recipes and other corrupted information. So, not only are they losing sales revenue, they are also incurring additional expenses.
How Cyber Insurance Mitigates Financial Loss in These Scenarios
Whether a business has a network outage or they need to restore corrupted software and/or information as a result of cyber attack, cyber insurance that includes business interruption and data restoration coverage can help businesses get up and running faster, and mitigate the income loss and extra expense they incur. But more than anything, it provides peace of mind.
Returning to the bakery example, instead of simply losing revenue while trying to fix network or software issues, or filing a claim against the software or network provider’s insurance policies that could go to court and take months or years to be paid out, the bakery’s own insurance policy can provide the funds and access to IT forensic firms to mitigate their loss much more quickly. This means the business will have the funds they need when they need them, so they can still meet payroll, and be able to fix their network and resume production as quickly as possible.
So when your client declines cyber coverage because they believe they don’t have a high exposure to a large data breach, don’t end the conversation because cyber insurance is much more than just data breach coverage.
At Admiral Insurance Group, our underwriters are experts at understanding the exposures company’s face from business interruption and data restoration incidents. If you are a retail broker, you can work with one of our wholesale partners to find Cyber insurance as part of their Professional Liability coverage that makes sense for your business clients.
Products and services described above are provided through various surplus lines insurance company subsidiaries of W. R. Berkley Corporation and offered through licensed surplus lines brokers. Not all products and services may be available in all jurisdictions, and the coverage provided by any insurer is subject to the actual terms and conditions of the policies issued. Surplus lines insurance carriers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.