According to the most recent IBM and Ponemon institute data breach report, the average cost of a cyber attack that resulted in a breach was US $4.35 million in 2022. However, considering that this is a rapidly developing situation, the cost may become even higher in the near future. It is also worth noting that the United States has the highest cost of a data breach of any other country—meaning American citizens have the most to lose should they fall victim to a cyber breach.
But why are cyber breaches so expensive? Really there are hundreds of cost factors to account for when a cyber breach occurs, but some stand out more than others. In the most expensive data breaches, companies often experience heavy losses related to:
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Legal fees
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Loss of brand equity
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Data recovery
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Increased customer turnover
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Drain on employee productivity
Because cyber attacks will continue to rise, cybersecurity insurance has become increasingly appealing to small and large enterprises. With more and more people turning to insurers for help, the pressure is on. In this blog, we will discuss the true cost of cybercrime and explain how insurers and their clients can effectively navigate this perilous landscape.
How Much Does Cybercrime Cost the Global Economy Each Year?
Cybercrime costs the world an almost unimaginable amount of money. For a better perspective, McAfee recently reported that up to 1% of the world’s GDP is currently being lost to cybercrime each year—that equates to nearly $9.6 trillion. In the United States alone, the FBI reported over $10 billion was lost to various cyber attackers in 2022.
Some of the major threats that cost businesses the most money include:
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Social Engineering Attacks | Social engineering involves manipulating people to gain access to confidential digital information using tactics like phishing and scareware.
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Configuration Errors | Poor configuration leads to significant vulnerabilities in a company’s digital information infrastructure. For example, misconfigured database servers often cause sensitive data to be accessed via the internet.
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Poor Cyber Hygiene | Faulty storage and failing to backup data make it easier for hackers to access sensitive data.
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Ransomware | One of the most common types of malware, ransomware blocks companies from accessing data on their systems, and then holds that data for ransom.
But this is only part of the picture. Let’s take a look at some additional statistics to gain a more comprehensive understanding of cybercrime’s financial impact.
What Is the Cybercrime Rate Around the World?
According to recent research from Zippia, cyber attacks happen once every 39 seconds and an estimated 30,000 websites are hacked each day, globally. In the United States, the FBI received over 800,000 cybercrime complaints in 2022.
What Is the Average Cost of a Cyber Attack for a Small Business?
According to CNBC, cyber attacks cost smaller US-based companies $200,000 on average, putting many small- and medium-sized companies out of business. Many smaller companies assume that they are not prime targets for cyber attacks. But the opposite is true. Small- to medium-sized businesses are often more likely to experience a cyber breach than larger organizations.
Is It All Doom and Gloom?
Considering that cyber criminals are becoming more organized and inventive, cyber attacks are likely to increase in frequency and destructiveness. From individuals to businesses large and small, everyone is at risk.
However, just because risk is high does not mean the situation is hopeless. Cybersecurity experts around the globe have made serious strides in improving preventive and protective measures to stay one step ahead of cyber criminals. For example, Trava has successfully supported all kinds of businesses through their unique cybersecurity journeys. Check out our case studies to see all of the progress we’ve made.
How Does This All Impact Cyber Insurance?
Because the financial fallout of cyber breaches looms large, businesses around the world are turning to cyber insurance. This means insurers are issuing more policies than ever before. However, because the cyber insurance industry is so young, it faces many complex challenges. The main hurdle is the level of risk insurers take on, which causes a rise in premium prices.
The good news is that while cyber risk is difficult to understand and assess, significant strides are being made to improve risk assessment techniques. For example, Trava’s free Cyber Risk Checkup gives insurers detailed insights into a potential client’s digital vulnerabilities so you can tell which clients are too risky to insure.
Really, insurance is only meant to fill in the gap when companies experience unavoidable breaches. Think of it this way, just because a person has health insurance doesn’t mean they shouldn’t wear their seatbelt when driving a car. Instead of relying on insurance to cover the cost of avoidable misfortune, businesses should invest in strengthening their cybersecurity framework and do all they can to mitigate risk. Then, cyber insurance is there to pick up the pieces when all else fails.
How Can Trava Help You and Your Clients?
When you partner with Trava, you can differentiate your business for all other providers by offering a robust cyber risk management program that helps your clients protect themselves. We’ll give your clients a comprehensive view into their cyber security infrastructure, so they can fix vulnerabilities that have previously flown under the radar. Partnering with Trava sets your practice apart from all other insurers by offering your clients a cybersecurity tool (and team) they desperately need. Ready to get started? Learn more about what Trava has to offer insurers here.