It’s the worst nightmare for a growing number of businesses… you discover that that you’re a victim of one of the most expensive, prevalent and malicious attacks in today’s modern economy – a cyber-breach.

Suddenly, without warning and with no time to prepare your response, all of your sensitive business information and customer data is in the hands of hackers.

No company, big or small, is immune to a data breach. Many small employers falsely believe they can elude the attention of a hacker, yet studies have shown the opposite is true.

According to Verizon Communication’s 2013 Data Breach Investigations Report, 31% of the 621 data breaches analyzed were at companies with 100 or fewer employees.

With the growing threat, and massive expenses associated with an attack, Cyber & Data Breach Liability Insurance policies are essential for organizations of any size.  But it’s not just a matter of insurance, your business needs to be prepared now for the inevitable breach with its own internal response policy.

A quality response policy should outline how your company will respond in the event of a data breach, and lay out an action plan that will be used to investigate potential breaches to mitigate damage should a breach occur.

Defining a Data Breach

A data breach is an incident where Personally Identifiable Information (PII) is accessed and/or stolen by an unauthorized individual. Examples of PII include:

  • Social Security numbers
  • Credit card information (credit card numbers – whole or part; credit card expiration dates; cardholder names; cardholder addresses)
  • Tax identification information numbers (Social Security numbers; business identification numbers; employer identification numbers)
  • Biometric records (fingerprints; DNA; or retinal patterns and other measurements of physical characteristics for use in verifying the identity of individuals)
  • Payroll information (paychecks; paystubs)
  • Medical information for any employee or customer (doctor names and claims; insurance claims; prescriptions; any related personal medical information)
  • Other personal information of a customer, employee or contractor (dates of birth; addresses; phone numbers; maiden names; customer numbers)

Data breaches can be costly. According to the Ponemon Institute’s 2014 Cost of a Data Breach Survey, the average per record cost of a data breach was $201 in 2013; the average organizational cost of a data breach was $5.9 million.

$201 might not seem like much, but when you take a second look at the list above of what’s considered Personally Identifiable Information, you might be shocked when you realized how many records you have for your clients.

A mere 500 records breached at a cost of $201 per record would result in more than $100,000 in damages.

Do you have $100,000 to spare?  Especially when a quality, comprehensive Cyber & Data Breach Liability policy is available for as little as $400 per year?

Curious about what you can do to prevent Cyber Crime?


Internal Responsibilities upon Learning of a Breach

A suspected breach of PII must be immediately investigated. The following information must be reported to appropriate management personnel:

  • When (date and time) did the breach happen?
  • How did the breach happen?
  • What types of PII were possibly compromised? (Detailed as possible: name, social security number, account and password information, etc.)
  • How many customers may be affected?

Once basic information about the suspected breach has been established, management should make a record of events and people involved, as well as any discoveries made over the course of the investigation to determine whether or not a breach has occurred.

Once a breach has been verified and contained, perform a risk assessment that rates the:

  • Sensitivity of the PII lost (customer contact information alone may present much less of a threat than financial information)
  • Amount of PII lost and number of individuals affected
  • Likelihood PII is usable or may cause harm
  • Likelihood the PII was intentionally targeted (increases chance for fraudulent use)
  • Strength and effectiveness of security technologies protecting PII (e.g. encrypted PII on a stolen laptop, which is technically stolen PII, will be much more difficult for a criminal to access.)
  • Ability of your company to mitigate the risk of harm

Government Regulation

There aren’t many federal regulations regarding cyber security, and the few that exist largely cover specific industries.

The 1996 Health Insurance Portability and Accountability Act (HIPAA), the 1999 Gramm-Leach-Bliley (GLB) Act and the 2002 Homeland Security Act, which includes the Federal Information Security Management Act (FISMA) mandate that health care organizations, financial institutions and federal agencies, respectively, protect their computer systems and information. The language is generally vague, so individual states have attempted to create more targeted laws regarding cyber security.

California led the way in 2003 by mandating that any company that suffers a data breach must notify its customers of the details of the breach.

Today, 46 states and the District of Columbia have data breach notification laws in place. Only Alabama, Kentucky, New Mexico and South Dakota have yet to enact such laws.

While notification laws vary from state to state, all include four basic provisions:

  1.  All notification laws put a number on how long companies have to notify customers of a data breach and by what medium the notice will be given (written, email, press release, etc.). In Ohio, the requirement is to notify the person no later than 45 days following its discovery or notification of the breach in the security of the system. Notification may be given in any of the following methods:  written notice; electronic notice; telephone notice; substitute notice; notification by a paid advertisement; conspicuous posting of the disclosure or notice on the company website; and/or notification to major media outlets.
  2. Laws set forth a penalty system (that differs from state-to-state) for failure to notify customers in a timely manner. In Ohio, civil action by the attorney general can be taken for failure to comply with any of the notification laws. A civil penalty can be given of up to $1,000 for each day of non-compliance, up to $5,000 per day after 60 days and up to $10,000 per day after 90 days.
  3. Depending on the specifics of the breach, customers can sue the company for its part in the data breach.
  4. All notification laws have exceptions in a range of situations. To review these exceptions or for additional information on Ohio laws, visit:

Your Notification Responsibilities

Responsibility to notify is based both on the number of individuals affected and the nature of the PII that was accessed.

Any information found in your initial risk assessment should be turned over to the legal counsel of your company who will review the situation to determine if, and to what extent, notification is required.

Notification should occur in a manner that ensures the affected individuals will receive actual notice of the incident. Notification should be made in a timely manner, but make sure the facts of the breach are well established before proceeding.

In the case that notification must be made:

  • Only those that are legally required to be notified should be informed of the breach. Notifying a broad base when it is not required could raise unnecessary concern in those who have not been affected.
  • A physical copy should always be mailed to the affected parties no matter what other notification methods are used (e.g. phone or email).
  • A help line should be established as a resource for those who have additional questions about how the breach will affect them.

The notification letter should include:

  • A brief description of the incident, the nature of the breach and the approximate date it occurred.
  • A description of the type(s) of PII that were involved in the breach (the general types of PII, not an individual’s specific information).
  • Explanation of what your company is doing to investigate the breach, mitigate its negative effects and prevent future incidents.
  • Steps the individual can take to mitigate any potential side effects from the breach.
  • Contact information for a representative from your company who can answer additional questions.

We Can Help You Recover from a Data Breach

We understand the negative effects a data breach can have at your company, we’ve seen first-hand how it impacts clients.  We also know which insurance companies provide the broadest insurance coverage to help you recover after a breach occurs.

But we don’t stop there.

The best place to begin is with your own internal operations, the security measures you have in place, and the controls implemented to avert an attack from a rogue employee.  To learn more about how we can help you, download our Cyber & Data Breach Liability eBook, or if you need to get insurance coverage in place now, simply Request a Proposal and we’ll get to work right away.