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What is cyber insurance in Canada?
Cyber insurance is a type of commercial insurance that covers your business financially in the event of a cyber security risk. This can include cases of data breaches, hacking, ransomware, and other digital threats. Your policy can help pay for the various expenses associated with such incidents, including recovery costs, legal fees, and client compensation.
What does cyber liability insurance cover?
What doesn't cyber liability insurance cover?
Other terms for cyber liability insurance
Cyber liability insurance is often used interchangeably with other insurance terms, such as cyber security insurance, cyber risk insurance, and cyber insurance. It's important to note that different providers may have varying scopes of coverage under these titles, so it's be sure to double-check the specifics of your policy.
Who needs cyber liability insurance?
If your business engages in any kind of digital process that could expose you to a cyber threat, you should highly consider purchasing protection – this includes those that offer software or hardware services, collect and store customer information, process payments and transactions online, and communicate with clients using digital platforms. Here, we cover a few different industries that could benefit from a cyber liability insurance policy.
IT consultants
Offering IT support, software development, or tech solutions can put you at a high risk of cyber crime, given the deep involvement with digital tools and data.
Retailers
Whether you're an e-commerce site or a brick-and-mortar store, processing customer payments can put you at risk for data breaches and payment fraud.
Health practitioners
Small healthcare practices, such as dental offices or physiotherapy clinics, handle sensitive health information, requiring protection against patient data breaches.
Licensed professionals
As a lawyer or accountant, you may handle sensitive client information that, if compromised, could lead to reputational damage and legal liabilities.
Real estate agents
With the increase use of digital tools to handle buyer and seller information, cyber liability insurance can protect you in the event of a digital threat.
Hospitality firms
Small-scale hotels and event planning firms often handle large amounts of personal payment information, along with booking and reservation data.
Did you know?
Cybercrime is more prevalent in Canada than you may realize. Based on recent data from Statista, here are a few key facts that underscore the widespread nature of digital threats across the country:
- 74,073 incidents of cybercrime were reported to the police in 2022
- Fraud was the most commonly reported form of cybercrime in 2022
- The number of reported cybercrimes increased by 387% between 2014 and 2022
- Reported cybercrime incidents cost an estimated $3.82 billion (USD) in 2023
- Reported cybercrime incidents are expected to cost $4.78 billion (USD) by 2028
Examples of cyber security insurance claims
To understand the value of cyber liability insurance, it's helpful to look at a few specific examples of claims you could potentially face. These cases illustrate a range of cyber incidents, plus how having the right insurance coverage in place can support the financial recovery of your business.
Compromised financial information
An employee of yours is tricked into clicking a link from a hacker, compromising all the financial information of your clients. In this case, cyber liability insurance can help pay to trace the breach and compensate the affected customers.
Stolen patient data
You own a private physiotherapy health clinic which means you hold a lot of sensitive patient information – a hacker leaks all the confidential data. In this case, your coverage can help with recovery expenses, along with legal and settlement fees if a client sues.
Ransom software attack
Your business is hit by a ransomware attack, leaving you unable to continue with regular operations for a week. In this case, your insurance can help pay for a negotiated ransom payment and cover your loss of income during this time.
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How much does cyber insurance cost?
Small to medium-sized businesses can expect to pay upwards of $1,000 each year for a cyber insurance policy. Keep in mind that every business will be quoted differently as each one brings a different level of risk – the more risk you bring, the more expensive your coverage will be. You won't know the exact price of your policy until you shop the market with us.
Also, know that cyber insurance can be bundled alongside other business insurance coverages (e.g. general liability insurance, professional liability insurance) under one quote. Be sure to consult a licensed commercial insurance broker to ensure your package is tailored to your specific operations.
Factors that impact your cyber liability insurance quote
To better understand the quoting process, here are six different factors that impact the cost of your cyber risk insurance. And again, generally speaking, the more risk your business brings, the more you'll need to pay for protection.
Industry type
Businesses in industries considered high-risk for cyber attacks – such as healthcare, finance, and retail – may see higher insurance costs due to the sensitive nature of the data handled.
Business size & revenue
Larger businesses with higher revenues typically face higher premiums due to the greater potential for significant financial losses from a cyber incident.
Scope & sensitivity of data
The type and amount of sensitive data your business stores – such as personal identification information, health records, or financial details –can impact your premium. More sensitive data means higher risk, leading to higher costs.
Security systems
With strong cybersecurity measures in place (e.g. firewalls, encryption, audits), you may qualify for lower premiums due to the reduced risk. And additional employee training can also help lower premiums.
Claims history
If you've made a cyber security claim in the past, this can increase the cost of your insurance coverage. Insurers may view it as higher risk, leading to higher premiums.
Coverage limits
The amount of coverage you choose will directly affect your premium. It's simple – higher coverage limits provide more protection but come at a higher cost.
Frequently asked questions on cyber insurance
Do I need cyber insurance for my small business?
While it's not required by law, it's highly recommended – small businesses are often targets of cyberattacks due to less robust security measures. Cyber insurance can protect against significant financial losses from these attacks.
Is cyber insurance worth it?
Yes, cyber insurance is considered valuable for most businesses – especially as digital threats continue to increase in frequency and severity. It offers financial protection against a range of cyber incidents that could otherwise cause significant financial losses and reputational damage. Given the rising costs associated with breaches and the legal ramifications of data laws, having the right coverage in place can be a critical component of a business's risk management strategy.
How much cyber insurance do I need?
The right amount of coverage depends on several factors, including your industry, the type of data you handle, your revenue, and your existing security measures. Consulting with a knowledgeable insurance broker is recommended to assess your specific risks and coverage needs.
Can cyber insurance cover both first-party and third-party risks?
Yes, cyber insurance policies can cover both first-party risks (direct losses to your business such as data recovery costs and business interruption) and third-party risks (claims against your business by others affected by a cyber incident involving your systems).
How does the claims process work for cyber liability insurance?
In the event of a cyber incident, you should promptly notify your insurer. The claims process typically involves an assessment of the incident which may include forensic investigation to determine the extent and cause of the breach, followed by resolution efforts (like recovery and legal defence if necessary).
Does having strong cyber security defenses affect my insurance premiums?
Yes, having robust cybersecurity measures can lower your risk profile and potentially reduce your premiums. Measures such as regular security audits, employee training programs, and strong network security can be favourable in the eyes of insurers.
How often should I review and update my cyber insurance coverage?
It's advisable to review your cyber insurance policy annually or whenever there are significant changes in your business operations, technology use, or scale of data handling. This ensures your coverage aligns with your current risk profile and business needs.
Does E&O insurance include coverage for cyber insurance?
Generally, E&O insurance (errors and commissions) does not inherently cover cyber-related incidents unless specifically stated. E&O covers claims against the business for professional errors, omissions, or negligence in providing services or advice. For comprehensive protection that includes cyber threats, businesses typically need a separate cyber insurance policy or a specific cyber rider added to their E&O policy.
Does cyber insurance cover ransomware?
Yes, most cyber insurance policies include coverage for ransomware attacks. The coverage typically pays for the ransom demanded (if deemed necessary and agreed upon by the insurer), the costs related to the negotiation with hackers, restoration of data, lost income due to business interruption, and legal and consulting fees associated with handling the aftermath of the attack.
What is bricking in cyber insurance?
Bricking refers to the scenario where a piece of hardware becomes unusable due to a cyber attack or malware infection. In the context of cyber insurance, a policy with bricking coverage would compensate for the cost of replacing the physically damaged or inoperable hardware device as a direct result of a covered cyber event.