pdv|c" target="_blank">Symantec Internet Security Report, there are 34,529 known computer security penetration incidents
per day. Not all the incidents result in the theft of personally identifiable information but the huge numbers are troublesome.
The panel, moderated by Joan K. Woodward, president of Travelers Institute and executive vice president of public policy, also included
- Tom Finan, senior cybersecurity strategist and counsel, U.S. Department of Homeland Security
- Chris Hauser, 2nd vice president for cyber fraud at Travelers Investigative Services and former FBI agent responsible for cyber investigations
- John Mullen, a managing partner at Lewis Brisbois Bisgaard & Smith and chair of its U.S. data privacy and network security practice
- Melanie Dougherty-Thomas, managing director of crisis communications management at Inform
The panelists agreed that small to mid-sized businesses are the most vulnerable, and one successful attack can shut those businesses down completely. But what types of claims are the most common and what do they really cost?
Travelers' cybersecurity experts have developed common cyber claims scenarios across five industries, as shown in the following pages. The costs add up quickly, often reaching more than $1 million.
[Related: What keeps Americans up at night? Travelers Consumer Risk Index]
(Photo: Thinkstock/Monkey Business Images)
1. Hack in the retail industry
Company Profile: A local retailer, $30 million in revenue
A credit card company identified 50,000 credit cards that were used legitimately at a retailer and then were subsequently compromised. The retailer also needed to hire a law firm to serve as counsel and breach coach. Costs included required notifications to the 50,000 victims as well as on-going credit monitoring. As a result of this incident a class action lawsuit was filed.
According to the NetDiligence® Data Breach Cost Calculator the estimated costs for this event for the retailer could be:
According to the Ponemon 2015 Cost of Data Breach Study, an average event of this type could drive the average costs up to $5,920,000 for a business.
| Lost Business Costs: | $3,720,000 |
| Post Breach Costs: | $1,640,000 |
| Notification Costs: | $560,000 |
Risk Management Tips:
- Maintain and frequently review compliance obligations under the Payment Card Industry (PCI) Agreement.
- Consider implementing end-to-end encryption of credit card transactions.
- Employ a chief information security officer (CISO) to develop and implement your business-wide data privacy procedures.
Editor's Note: The NetDiligence® Data Breach Cost Calculator and other tools are available to insurers on the Travelers' eRisk Hub®. eRisk Hub is a registered trademark of NetDiligence.
(Photo: Thinkstock/peterspiro)
2. Hack in the healthcare industry
Company Profile: A nonprofit hospital, $100 million in annual revenue
An employed physician of the hospital accidently left his hospital-issued laptop on a train. The laptop contained an unencrypted database of current patient records that included protected health information with the name, Social Security number, credit card, insurance ID and limited medical information of 550 patients. The data stored on that laptop was completely unsecured as it did not contain remote take-down capabilities nor was it password protected.
According to the NetDiligence® Data Breach Cost Calculator the estimated costs of the 550 lost records for the Nonprofit Hospital could be:
| Incident Investigation Costs: | $180,000 |
| Customer Notification and Crisis Management Costs: | $34,000 |
| Fines & Penalties: | $167,000 |
| Total Costs: | $381,000 |
| Detection Costs: | $610,000 |
| Notification Costs: | $560.000 |
| Regulatory Costs: | $1,979,000 |
Risk Management Tips:
- Implement procedures for using effective passwords and mandate periodic changes.
- Consider implementing security measures including encrypting protected health information (PHI) that may be stored on the laptops and having remote disabling capabilities.
- Consider storing PHI on a central server and accessing the information via a secure connection.
(Photo: Thinkstock/ayo888)
3. Hack in the financial industry
Company Profile: A community bank, $350 million in assets
Computer hackers commenced a distributed denial-of-service attack (DDoS) to the bank's website as a smoke screen to hack into its network. This malicious attack shut down the bank's online banking for three days.
According to the NetDiligence® Data Breach Cost Calculator the estimated costs for this event for the Community Bank could be:
| Incident Investigation Costs: | $192,000 |
| Customer Notification and Crisis Management Costs: | $475,000 |
| Fines & Penalties: | $132,000 |
| Total Costs:* | $799,000 |
| *Not including the loss of business income the bank suffered during the attack. |
| Detection Costs: | $610,000 |
| Notification Costs: | $560,000 |
| Post Breach Costs: | $1,640,000 |
Risk Management Tips:
- Create, implement and test a business continuity plan and disaster recovery plan.
- Implement an intrusion detection system on your network.
- Have a secondary system available for online access, and ensure this system is regularly tested for functionality.
(Photo: Thinkstock/Ablestock.com)
4. Hack in the technology industry
Company Profile: Software as a service (SAAS) provider of human resources and membership management software for gymnasiums countrywide
An employee opened up a phishing e-mail that infiltrated the company's centralized network. Anti-virus software failed to keep out the malicious code, exposing names, addresses, dates of birth, Social Security numbers and financial information, such as credit card and bank account numbers. A computer forensics investigator was hired, who determined that personally identifiable information had been compromised. This included information related to the customers' employees as well as the company's own employees.
According to the NetDiligence® Data Breach Cost Calculator* the estimated costs for this event for the software service provider could be:
| Incident Investigation Costs: | $291,000 |
| Customer Notification and Crisis Management Costs: | $504,000 |
| Fines & Penalties: | $550,000 |
| Total Costs: | $1,345,000 |
| Detection Costs: | $610,000 |
| Notification Costs: | $560,000 |
| Post Breach Costs: | $1,640,000 |
Risk Management Tips:
- Implement vendor security into your Information Security policies and procedures.
- Add provisions that address cybersecurity into your vendor contracts.
- Practice cyber-attack response drills with your vendors.
[Related: Cyber security precautions needed with insurer-TPA relationships]
(Photo: Thinkstock/Felipe Dupouy)
5. Hack in the manufacturing industry
Company Profile: A manufacturer with 400 employees
The Internal Revenue Service discovered that hundreds of fraudulent tax returns were filed on behalf of employees that work for the same manufacturing company. They notified the FBI, and the FBI alerted the manufacturer. The investigation determined that the personnel files of 298 past and current employees had been accessed.
According to the NetDiligence® Data Breach Cost Calculator the estimated costs of the 298 lost records for the manufacturer could be:
| Incident Investigation Costs: | $180,000 |
| Customer Notification and Crisis Management Costs: | $29,000 |
| Fines & Penalties: | $6,000 |
| Total Costs: | $215,000 |
| Detection Costs: | $610,000 |
| Notification Costs: | $560,000 |
| Legal Settlement Costs: | $558,000 |
Risk Management Tips:
- Establish an information retention policy and include guidance on what types of information should be retained, how long it should be retained and procedures for destruction of unneeded data.
- Establish new hire training and regularly scheduled refresher training courses in order to instill the data security culture of your organization.
- Create, implement and test an incident response plan.
As Tim Francis likes to remind business owners and risk managers, all businesses are vulnerable: “It's not a matter of if, but when.” Be sure to review your insurance coverage with your agent, broker or carrier to understand what cyber coverage you have and what you might need.
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