Not sure what cyber insurance can do for your business? Here's six examples of how cover is used in real life.
Cybercrime is considered to be the biggest threat facing large corporations and SMEs alike. So if any part of your business is conducted on the Internet or involves the collection and storage of sensitive data, cyber insurance is must-have cover.
Six examples of cyber breaches
The following are examples of typical cases where each of the six types of cover is involved:
1. An ATM breach
- Problem. An IT firm providing data services for ATMs suffered an employee error during offsite data backup operations which allowed customers to withdraw an unlimited amount of money from the ATMs, despite how much they had in their accounts.
- Repercussions. The owner of the ATMs sued the IT company to recover their losses and the company had to pay around $250,000 in damages and $20,000 in legal costs.
- Solution. The IT company’s cyber insurance covered their liability for errors in their service and paid for both indemnification and legal fees.
2. Leaked credit card information
- Problem. A travel agent had their server breached on three separate occasions, with more than 250,000 customers’ personal details (eg, credit card information) compromised.
- Repercussions. The company had to pay over $1.5 million for IT forensic fees and legal defence fees as well as notify those affected and provide credit monitoring services.
- Solution. The travel agent’s cyber insurance covered all of their costs under the customer support and reputational expenses section of their policy.
3. Being sued for copyright
- Problem. A company used an image on their blog page similar to a copyrighted image used by another business. The entity demanded they remove it, but discussions broke down and the matter then went to court.
- Repercussions. The plaintiff demanded more than $5 million in damages and the company had to pay a settlement of $2 million plus $1.23 million in legal fees.
- Solution. The company’s cyber insurance covered their copyright breach under their multimedia liability cover.
4. Website crashing and unable to receive payments
- Problem. A charity in the United States was hit with a denial of service (DOS) attack, which flooded their server with traffic in the final days of a campaign.
- Repercussions. The site was inaccessible for a whole day, resulting in over $1 million in lost donations.
- Solution. The company’s cyber insurance paid the charity $1.5 million for lost donations and website repairs under the cyber business interruption and hacker damage sections of their policy.
5. Leaked customer details
- Problem. As part of a marketing promotion, a retailer sent an email to customers but mistakenly attached a document including sensitive customer data instead of a promotional flyer.
- Repercussions. Several of the affected customers sued the retailer for breaching their privacy and the resulting settlement sum and legal fees came to around $250,000.
- Solution. The retailer’s cyber insurance covered their legal costs and indemnification under their security and privacy liability cover.
6. Cyber extortion
- Problem. An IT company had their server hacked and the records of millions of registered users stolen. A ransom payment was demanded, threatening to post the records online for the world to see.
- Repercussions. The cost of extortion, including IT forensic costs and ransom payments, exceeded $2 million.
- Solution. The company’s cyber insurance covered all of their losses under the cyber extortion and other sections of their policy.
The examples above were based on real life cases from:
1. London Australia Underwriting
2. BizCover Brokers Australia