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Get Ready to Shop for Data Breach Insurance

Special Risks Insurance

Updated on May 20, 2013

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Get Ready to Shop for Data Breach Insurance
by Christine Marciano, President, Cyber Data Risk Managers


As your organization plans its security, the conversation must shift from if the business will experience a cyber attack or data breach to what to do when it happens. It's important to be proactive in considering how costly and embarrassing such a breach would be.

Ordinary insurance has limits

Today, data and intellectual property (IP) have become the most valuable asset of the average organization. Neither is covered under standard insurance policies. Both of these assets are considered "intangible" assets and standard insurance policies today only cover "tangible" property or assets. While a standard insurance policy may cover the loss of a computer through theft and/or the destruction, it does not cover the data stored in the computer, which typically is worth much more than the computer itself.

To augment the potential costs of data breaches, many businesses are turning to data breach insurance as part of an overall risk management strategy. Data breach insurance offers businesses a comprehensive risk management solution for assisting in a cyber attack and/or a data breach. It just may be the thing that protects a business today from going out of business or having to file bankruptcy in the event of attack by cybercriminals or even loss from some other catastrophe.

The wild, wild west

The types of coverage offered by data breach insurance policies (also known as "cyber/privacy" insurance) vary dramatically by insurance carrier. For businesses, choosing the right policy can be a challenge. Working with a knowledgeable insurance broker who has experience with data breach insurance policies can reduce the challenges. Before you start shopping, though, there are few things you need to do to get ready:

1) Assess your cyber hygiene

Before applying for data breach insurance, businesses should have policies and procedures in place that show they they are protecting and securing their data as well as enforcing their security and privacy policies. While data breach insurance can help businesses mitigate risks, it cannot replace good cyber hygiene.

2) Evaluate your needs and priorities

Has your business assessed its risks for a data breach? Depending on your business's industry, your risk for a data breach may be considered anywhere from minimal to very high.

Has your business conducted a risk assessment? Evaluate, identify, and mitigate any gaps in your privacy and security programs prior to applying for a data breach insurance policy.

3) Predict your data breach

Once you have assessed your risks, you will want to think of as many possible data breach scenarios as you can that could happen to your business. The purpose of this exercise is to arm you with potential data breach scenarios and prepare you to go on a search, with a knowledgeable insurance broker, for a policy that fits your needs. While this may seem like a time-consuming process, it could help ensure that you're covered in the event one of these data breach scenarios happens. The whole purpose of purchasing insurance, after all, is to ensure that you are protected from potential risk.

After these three steps, you are ready to compare different policies. Stay tuned for some tips on evaluating data breach policies.

*Article originally appeared in http://www.point2security.com (6/21/12)

CONTACT:

Christine Marciano
CYBER DATA RISK MANAGERS LLC
US toll free: 1 +855.CUT.RISK
Fax: 1 +732.709.1684
Twitter: @DataPrivacyRisk

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