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DataBreach/Cyber Liability/Data Security -
A Must Buy for ALL Businesses No Matter the Size!

Data Security

Data security and privacy is of paramount concern to risk managers and businesses around the world. Whether a business keeps confidential employee data, customer information such as credit card data, or confidential client information, maintaining the security and privacy of this information is critical. Recovering from a breach can be expensive and time consuming. Determining the cause and extent of the breach, complying with the notice laws, correcting damage, public relations, and potential lawsuits from customers and clients can truly drain a business.

Data breaches occur every day. While hacking incidents are the most recognizable and expensive cause of data loss, they are not the most common. It's a startling fact - simple human error accounts for three out of four incidents

  • 40% of the data breach cases are from people making mistakes, such as losing laptops or flash drives.
  • 36% are system glitches, such as software updates, which inadvertently expose sensitive private files
  • 24% are malicious and criminal attacks1

When post-breach costs are weighed, it becomes easier to understand the value of insurance.

Easily quantifiable post-breach costs can arise from:

  • Customer notification - $1-$2 per person
  • Consulting help for forensic research and data recovery - $250-$300 per hour
  • Credit monitoring subscriptions - $10-$20 per person
  • Credit card reissuance fee - $20-$30 per card
  • Legal fees - $400-$600 per hour
  • Information hotlines for customer support - $5+ per call

Additional costs which are difficult to estimate:

  • Public relations activities - costs vary widely
  • Technology changes and staff training - potentially thousands of dollars
  • Reward expenses - thousands of dollars
  • Extortion demands - impossible to predict
  • Replacing stolen funds or securities - impossible to predict

Ponemon's Institute 2010 annual study estimates an average post breach cost of $214 per record. Although this includes $141 in lost business cost, the remaining $73 of actual remediation cost can add up quickly:

Example Breach

Hotel customer's credit card data stolen from hacked server

  • Number of Records - 700
  • Estimated costs at $73 per record - $51,100
Example Breach

A physical therapy company dumped sensitive customer information into garbage containers behind its facility. The records included Social Security numbers, credit and debit card account numbers, names, addresses and telephone numbers

  • Number of Records - 4,000
  • Estimated costs at $73 per record - $292,000
Example Breach

Laptop with employee information stolen out of a parked car

  • Number of Records - 4,300
  • Estimated costs at $73 per record - $313,900
Example Breach

Missing hospital computer tapes containing Social Security numbers of patients

  • Number of Records - 52,000
  • Estimated costs at $73 per record - $3,796,000


  • Data Breach & Privacy Liability (3rd party coverage)
    • Covers liability arising out of unauthorized access to confidential information
    • Broad definition of unauthorized access to include paper records
    • Coverage afforded for unauthorized access by employees and other authorized users
  • Supplementary Payments
    • Extends to private data entrusted to a third party
  • Data Breach Loss to Insured (1st party coverage)
    • Costs to restore insureds own data
    • Theft of money and securities through unauthorized access
    • Extra expense while recovering from the breach
  • Electronic Media Coverage
    • Covers web content, including social media, which is alleged to include:
      • Libel, slander, other defamation
      • Accidental public posting of private information and copyright, trademark infringement
  • Reward Coverage Reimbursement
  • Forensic/Incident Response Services


  • Medical Facilities
  • Insurance Agencies/Brokers
  • Car Dealerships
  • Regional Banks and Credit Unions
  • Benefit Administrators, TPAs
  • Retail Stores
  • Contractors
  • Manufacturers
  • Wholesalers
  • Consultants
  • State and Municipal Governments



No matter the sophistication of the security system there is little that can be done to eliminate the risk of human error. A common, accidental breach is a real business risk worth considering today.

Article of Interest:

"Insuring Clients Against Privacy Losses"

Website of Interest:

This website keeps track of data breaches, etc.

1 Ponemon Institute, LLC "2009 Annual Study: Global Cost of a Data Breach," a benchmark study sponsored by PGP Corporation, January 2010

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