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Data breach is the exposure of sensitive customer information due to hacking, theft or the accidental release of data. Business owners are expected to be custodians of customer information and have a reasonable expectation to protect their customers’ data. A privacy breach is impactful for all businesses, but it can be devastating for a small business without the resources of a larger corporation. In this four-part blog series, we share the top three data breach myths, eight tips to prevent data breach, how to react to a data breach, and how to protect your business from costly data breach damage.
For 20 days in late 2013, Target Corporation experienced one of the largest data breaches in American history. Hacked information included some 70 million customer names and 40 million credit and debit card numbers including the short verification codes on the back of compromised cards. In addition to forcing the retail giant to book a reported $61 million in direct costs related to the breach, it also scared customers away from shopping at their stores – which resulted in a 46% drop in net profit during the holiday quarter. Although the exact full costs of the breach are not yet known, security analysts have pegged the costs at upwards of $400 million.
A data breach can be even more impactful for a small business and cause irreparable harm to your company’s reputation. The cost of even a small breach can be wildly expensive. Typical costs can include:
- Internal investigation: $14,000
- Regulatory compliance: $125,000
- Notification and crisis management: $28,000
- Class action lawsuits: $5,000 per person exposed
With costs for even small breaches ranging into the tens and hundreds of thousands of dollars, it’s simply not an option to go without insurance coverage. One problem, however, is that not all cyber liability coverage is created equal. Many insurance policies do not adequately cover the various costs involved in a privacy breach.
These are important protections to look for when considering a cyber liability policy:
- Internal investigation costs
- Regulatory compliance costs
- Notification to customers/clients
- Notification to government authorities
- Printing and mailing costs
- Proactive monitoring services that allow recipients to monitor their credit or public record files
- Legal liability – victims will seek to recover their costs, perhaps as part of a class action suit
- Electronic and non-electronic acts or accidents that result in the exposure of sensitive customer information
A privacy breach is embarrassing, costly and potentially business crushing. But it is avoidable.
Society’s team of risk control experts take care of the details to help business owners avoid catastrophic losses and keep their customer, employees and businesses protected. Find a local independent Society agent and learn more about how to best protect your business.
Excerpts were taken from the following sources. For more valuable information on data breach:
- Read this article, “Detecting and Fending Off Data Breach” published in the spring issue of Wisconsin Grocer (Wisconsin Grocer’s Association).
- Download this FREE whitepaper, “Protecting your Business: Mitigating Data Breach.”
- Data Breach Series: Top 3 Data Breach Myths (Part 1 of 4)
- Data Breach Series: 8 Tips to Prevent Data Breach (Part 2 of 4)
- Data Breach Series: How to React to a Data Breach (Part 3 of 4)