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Cyber Liability: Resolving Attacks Immediately Saves Money


When Sony experienced a data breach in 2011, at last count there were 100 million customer accounts that were compromised. The company is anticipating that the breach will cost it $200 million, and as of December, there were 58 class-action lawsuits in the pipeline. What’s more, Sony was heavily criticized for not responding quickly enough, taking too long to advise customers that their personal data was compromised.

Delay in responding to such attacks cost companies money and goodwill. According to a study by Ponemon Institute, if not resolved quickly, cyber attacks can get costly. In fact, results show a positive relationship between the time to contain an attack and the organizational cost. The 2011 study, which includes interviews with 50 companies, shows that the average time to resolve a cyber attack is 18 days, with an average cost to participating organizations of $415,748 over this 18-day period. This represents a 67% increase from 2010’s estimated average cost of $247,744, which was compiled for a 14-day period.

These findings are further underscored by a study released by Symantec (owner of Norton Security), indicating that the cost of a breach like Sony suffered can rise dramatically depending on the speed. A slow response results in an average cost per record of $141.00 while a fast response results in a cost of $106.00 per record.

Now these numbers are averages and every situation is different. But it does show that the time it takes to respond to an attack definitely impacts the expense involved. Part of the issue in having a slow response is that companies don’t want to show their vulnerability. Yet 2011 showed us that the exposure is very real and continues to grow. So there is no reason to wait to announce that a breach has occurred, and to do everything to resolve it immediately, including notifying consumers individually. You’ll save money and your reputation – as transparency is what the consumer expects.

Cyber Liability insurance helps in not only saving companies money but also with reputational management. And although the issue of cyber attacks is all over the news and on the government’s radar, only one-third of companies surveyed by research group Advisen carry this coverage. It is, however, expected that this will significantly increase now with the new SEC requirements and the tidal wave of press this issue has garnered over the last couple of years.

If you would like to talk to us about your Cyber Liability exposure and how we can help protect your firm from the significant loss such a risk poses, give us a call at  (877) 787-5258. We can provide you with the insurance you need.

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Blogged on: March 20, 2012 by Mike Smith
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