Can Insurance Cover Cyberattack Interruptions?

One of the increasing types of interruptions is cyber-attack interruptions. A cyber-attack can disrupt a business’s access to its online systems, leading to significant financial loss and reputational consequences.

A cyber-attack will be covered by cyber insurance; however, most cyber insurance policies will not cover the serious interruption caused. This case study explains how business interruption insurance covered a cyberattack and saved a business from a substantial financial loss.

Client Background

Our client is an E-commerce business that sells sports goods online in Asia. They do not own a physical shop; they work out of an office and a warehouse. Their business activities include marketing their products on social media, processing online orders and payments (via their website), and shipping products from the warehouse to customers.

 Their website and all online platforms are a crucial part of their business. The business aims to open a physical shop after establishing a larger brand image and a broader customer base. However, when working online, there are many risks that business owners need to be aware of and find the best protection.

These protections include having strong cybersecurity and cyber insurance. Unfortunately, cybercriminals sometimes still manage to bypass cybersecurity measures and infect online businesses. Thankfully, cyber insurance covers a business’s liability against a cyber attack involving sensitive customer information and helps recover from the attack.

Although cyber insurance will not cover cyberattack interruption, the costs can add up to a hefty amount.

Client problem – Cyberattack Interruption

Unfortunately, the client was a victim of a severe cyber malware attack that corrupted their entire online system and data. As a result, the company had to contact their cyber insurance company immediately. 

The cyberattack experts informed them that they would have to shut down their business for at least two months to recover and prevent the malware from spreading fully. This means they will not be able to collect new orders and paymentsto protect their customers. However, in the two months, the cyber experts extracted the malware and recovered all the infected data while informing the affected third party.

Therefore, during the two months of cyberattack interruption, the sports E-business did not receive any new income. In addition, they had to pay their ten employees, office & warehouse rent and additional expenditures. 

How Business Interruption Insurance Was The Solution For A Cyberattack Interruption?

Fortunately, the business had purchased business interruption insurance. 

Business interruption insurance is a policy that covers lost income when your business temporarily closes due to a covered incident. In their case, the incidents included cyber attack interruptions and will cover income loss plus expenditure for the interruption period.

Many businesses can shut down due to an interruption; with business interruption insurance, the business can recover and focus on a better future. Therefore, the company could allow cyber experts to remove the malware without worrying about financial loss. However, it is essential to inform both loyal customers and the general public.

The business interruption insurance reimbursed the following costs:

Income  (calculated by previous months)

• : HKD 1,200,000

Office & warehouse rent:

• HKD 150,000

Employees’ Salary

• : HKD 500,000 ( 10 employees)

Addition costs

• : HKD 50,000

  
  

Total Costs reimbursed: HKD 1,900,000

Cyberattack Interruption Case Conclusion

Cyberattack interruptions are becoming increasingly common in this technology generation, and every company should have a protection plan in place against them.

Business interruption insurance should be bought by any company that would lack funds if the business temporarily shuts down. It is an insurance extension typically purchased with property all risk, as it most commonly covers physical interruptions like fires, floods and natural disasters.

Although it is crucial to understand that insurance will not cover partial interruptions of just a few days or hours (depending on the insurance company), it is therefore better to purchase the insurance now than regret it when faced with a severe cyber attack interruption.

To learn more about Business Interruption Insurance and be covered from cyber attack interruptions, contact Red Asia Insurance.