Cyber risk is no longer just a concern for large corporations or tech companies. Today, nearly every business relies on technology in some way—email, online banking, payroll systems, customer databases, websites, point-of-sale systems, or cloud-based software. That reliance creates real exposures, and when a cyber incident occurs, the financial impact can be significant.
Below is an overview of the most common cyber exposures faced by commercial insurance customers and the types of expenses businesses may incur following a cyber claim.
Common Cyber Exposures for Businesses
1. Data Breaches & Loss of Private Information
Most businesses collect and store sensitive information, including:
- Employee data (Social Security numbers, payroll information, health data)
- Customer or client data (names, addresses, financial information)
- Credit card and payment information
A cybercriminal who gains access to this information can steal, sell, or misuse it, exposing the business to regulatory scrutiny, legal liability, and reputational damage.
2. Social Engineering & Fraudulent Impersonation
Cybercriminals frequently use email, text messages, or instant messaging to impersonate:
- Vendors requesting changes to payment instructions
- Clients asking for refunds or wire transfers
- Executives or finance staff authorizing urgent payments
These scams can result in significant financial losses when employees act in good faith on fraudulent instructions. Many businesses are surprised to learn that traditional property or crime policies may offer limited or conditional coverage for these losses, making cyber insurance an important complement.
3. Ransomware & Cyber Extortion
Ransomware attacks encrypt a business’s systems or data, making them unusable until a ransom is paid. These attacks can:
- Shut down operations entirely
- Prevent access to critical customer or financial data
- Spread across networks and connected devices
Even when a ransom is not paid, the cost of responding to a ransomware event can be substantial.
4. Business Interruption from Cyber Events
A cyber incident can halt operations just as effectively as a fire or natural disaster. Examples include:
- Network outages
- System shutdowns after a breach
- Website or e-commerce platform failures
Lost income, delayed projects, and extra expenses incurred to continue operations are common consequences.
5. Website, Email, and Network Security Failures
Businesses with websites, customer portals, or email systems face exposures such as:
- Malware or viruses introduced through email
- Denial-of-service attacks that make websites unavailable
- Unauthorized access through weak passwords or outdated software
Because customers and regulators can access a business from anywhere in the world, these failures can trigger multi-state or even international compliance issues.
6. Internet of Things (IoT) & Connected Devices
Modern businesses increasingly rely on connected devices such as:
- Smart thermostats or refrigeration systems
- Security cameras and access controls
- GPS trackers and automated equipment
These devices can create unexpected entry points for cybercriminals, allowing them to move deeper into a company’s network.
Expenses Businesses May Face After a Cyber Claim
A cyber incident often triggers multiple categories of expense, many of which are not covered under traditional insurance policies.
1. Incident Response & Investigation Costs
Immediately after a cyber event, businesses may need:
- Forensic IT specialists to determine how the breach occurred
- Legal counsel specializing in privacy and data security
- Crisis management professionals to guide the response
These costs begin almost immediately and can escalate quickly.
2. Notification & Credit Monitoring Expenses
Many state, federal, and international laws require businesses to notify affected individuals after a data breach. Costs may include:
- Drafting and mailing notification letters
- Call center services to handle customer questions
- Credit monitoring or identity theft protection for affected individuals
3. Regulatory Fines & Penalties
Depending on the nature of the data involved and where affected individuals reside, businesses may face:
- State or federal regulatory investigations
- Civil fines and penalties
- Costs to respond to regulatory inquiries or audits
4. Legal Defense & Liability Claims
Customers, clients, or business partners may file lawsuits alleging:
- Failure to protect private information
- Negligence in data security practices
- Breach of contract
Defense costs alone can be substantial, even if the business is ultimately not found liable.
5. Ransom Payments & Negotiation Costs
In ransomware or cyber extortion scenarios, expenses may include:
- Ransom payments (where legally permitted)
- Professional negotiators
- Cryptocurrency transaction costs
6. Business Income Loss & Extra Expense
Cyber incidents can disrupt operations for days or weeks, resulting in:
- Lost revenue
- Overtime wages
- Costs to outsource services or rent temporary equipment
7. Data Restoration & System Repair
After an incident, businesses often need to:
- Restore or recreate data
- Repair or replace compromised systems
- Upgrade security to prevent future incidents
Why Cyber Insurance Matters
Traditional property, liability, crime, and management liability policies were not designed to address the full scope of modern cyber risk. Coverage is often limited, excluded, or subject to restrictive conditions.
A stand-alone cyber insurance policy is designed specifically to respond to both:
- First-party losses (direct costs to the business)
- Third-party liabilities (claims, lawsuits, and regulatory actions)
Cyber insurance does not eliminate risk, but it provides critical financial protection, expert resources, and incident response support when a cyber event occurs.
Final Thoughts
Cyber incidents are no longer a question of if, but when. Understanding your cyber exposures—and the potential costs of a claim—is the first step toward protecting your business.
At Rathbun Insurance, we take a comprehensive approach to cyber risk. As an independent agency, we work with multiple insurance companies, allowing us to compare options and tailor cyber insurance solutions to your specific operations, industry, and risk profile.
In addition, some of the cyber insurance carriers we work with go beyond traditional coverage by offering valuable risk management resources as part of the policy. These may include proactive security risk assessments to identify vulnerabilities, remote support and assistance to help remedy security gaps, critical threat alerts, access to expert technical support, dark web monitoring, phishing simulations, and deep system scanning. These tools are designed to help reduce the likelihood of a cyber incident before one occurs.
Cyber insurance can be more than just paying a claim after a loss—it can be an active part of protecting your business.
If you would like to discuss your cyber exposures and explore coverage options and resources designed to support your business, our team is here to help.