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Insuring against costly cybercrime: what can you do?
Cybercrime and data breach incidents have the potential to affect all individuals and businesses. “Cybercrime” can mean both crimes directed at computer technology (such as hacking) and crimes where computers are an integral part of an offence, such as online fraud or identity theft. Data breaches may be caused by malicious cybercrime, such as theft and hacking, or inadvertent human or technical error.
A 2014 study conducted by Hewlett Packard, found that the average annual cost of cybercrime incurred by a sample of 30 Australian organisations was $4.3 million. This study also found that the average time to resolve a cyber-attack was 23 days at an average cost of $276,323. The Attorney-General’s Department reported in its 2013 National Plan to Combat Cybercrime that the cost of cybercrime in Australia is as high as $2 billion annually.
In many cases, legacy insurance policies will not cover these new and evolving cyber risks. For example, business interruption insurance policies are often drafted to cover losses caused by a tangible, physical event and would therefore be unlikely to cover any losses caused by a cyber-attack. Other policies expressly exclude internet-related loss. Businesses should therefore consider obtaining advice regarding the scope of their existing policies and whether additional, specialised cyber liability coverage is necessary.
The insurance industry has responded to the growing risks and costs faced by businesses as a result of cyber breaches. Insurance providers have developed specific cyber-liability or network security and privacy insurance to cover these new and evolving risks.
network interruption insurance for net income that would have been earned had the security failure not occurred.
Businesses should consider the scope and coverage of their existing insurance arrangements and the possibility of transferring risk by obtaining a specialised cyber-liability policy as part of a cyber-liability and data breach assessment.
The statistics clearly demonstrate the significant risks posed by the evolving threats of cybercrime and data breaches to Australian companies.
consider possible risk transfer strategies, including obtaining cyber liability insurance.