In today’s digital world, cyber threats lurk in every corner, waiting for the perfect opportunity to strike. No industry is immune, yet many business owners, especially in the legal field, mistakenly believe they’re not lucrative targets for cybercriminals. The truth? Every law firm, regardless of size, is a prime target due to the wealth of sensitive client data they manage.
A single cyberattack can cripple operations, tarnish a firm’s reputation, and expose clients to financial and legal risks. The aftermath isn’t just about recovering stolen data, it’s about rebuilding trust, mitigating liability, and ensuring compliance with stringent regulations.
This is where cyber liability insurance comes into play. But is it just another business expense, or is it an investment in your firm’s future?
In this article, we’ll explore why law firms are high-risk targets, what drives cyber liability insurance costs, and why having the right coverage can mean the difference between survival and financial devastation.
Why Law Firms Are Prime Targets for Cyber Threats
Law firms of all sizes are particularly attractive targets for cybercriminals due to the wealth of valuable and sensitive information they retain and manage. It is typical for firms to handle a wide array of confidential materials, including personal client data and information, financial records, legal documents, and proprietary business information. This combination of high-stakes information makes law firms a prime target for attacks.
As the legal field undergoes rapid digital and technological advancements, cybercriminals are leveraging these growing pains and finding vulnerabilities. The legal industry’s reliance on digital communication and cloud-based document management only heightens the risk, making robust cybersecurity measures essential to safeguard against potential threats.
Recognizing that your law firm is just as susceptible to a cyberattack as a multi-million-dollar tech company or a government agency is the first step. Then, acknowledging that the consequences of a data breach extend beyond financial losses. Firms risk non-compliance penalties, breached confidentiality agreements, and irreparable harm to client trust.
Key Factors that Drive Cyber Liability Insurance Premiums
One of the primary factors influencing premiums is industry risk. Insurers assess which industries are most vulnerable to cyber threats to price policies appropriately and maintain program stability. Although the legal industry is a prime target, that doesn’t necessarily mean high prices. There are many other factors that go into calculating premiums, as well as best practices businesses can implement to reduce their rate of risk.
Company size and revenue also play a role. Revenue helps the carrier gain insight into the scale of operations, in turn, helping determine potential risk exposure. Outside of business operations and industry, the coverage type selected will affect the premium. In addition, the policy limits, deductible, and coverage add-ons will all impact pricing.
While some insurers offer lower rates, a bargain policy may signal an unstable carrier that won’t be in the market long-term. By purchasing a policy with a carrier that is not well established or reputable, law firms put their practice at risk of losing coverage if the insurance company becomes insolvent.
Risk management and cybersecurity measures can also influence premium costs. Firms that implement firewalls, encryption, and employee cybersecurity training reduce their exposure and may qualify for lower premiums. Some carriers provide guidance on best practices that can directly impact the pricing, helping insureds make effective decisions for their business.
Should You Use Professional Liability Insurance for Cyber Liability Coverage?
Protecting Your Law Practice Begins with You
Safeguarding your law practice starts with awareness. Understanding the risks out there and the tactics of cybercriminals can help you develop strategic procedures to minimize exposure.
We have a full article on cybersecurity risks for law firms and suggested proactive measures. Here are some key takeaways:
- Cybercriminals are crafty, creative, and vicious. New types of threats emerge every year making it more important than ever to stay ahead of the evolving methods cybercriminal use.
- Common cyber threats include data breaches, ransomware attacks, phishing (there are several styles/tactics of phishing), social engineering, and denial-of-service (DoS/DDoS) attacks.
- Data breaches have increased by 72% in the past 3 years, with total reported losses in the tens of billions of dollars.
- No one is immune. Assuming your firm isn’t a target is a dangerous mistake. Cyberattacks can lead to financial losses, reputational damage, operational disruptions, data theft, privacy violations, intellectual property theft, and even the loss of your firm.
- Human error is a leading cause of breaches. Combating this vulnerability boils down to education and training.
- Weak passwords are like leaving the doors unlocked. Strong passwords and multi-factor authentication (MFA) are critical to security.
- Software updates aren’t just about new features. They contain security patches and bug fixes to protect the software from known cybercriminal tactics.
- Utilizing a VPN is necessary when using a public network. Without it, your activity is exposed to prying eyes.
By taking these precautions, law firms can significantly reduce their cyber risk and strengthen their overall security defenses. Read more to gauge your preparedness level: Is Your Law Firm Prepared for a Cybersecurity Breach?
Cyber Liability Insurance as a Cybersecurity Defense Tactic
Investing in technology, quality tools, and training should all be part of a law firm’s cybersecurity defense plan. But don’t overlook Cyber Liability Insurance. It is a crucial piece of protection and loss prevention. Without it, you could be paying substantial out-of-pocket costs to defend a claim that could leave your business in shambles.
According to a Truelist article, 94% of companies never recover from a severe data loss. Whether recovery occurs immediately or within two years, it is a brutal possibility to accept.
Most Cyber Liability Insurance carriers offer tools and resources to their insureds to encourage cybersecurity best practices and bring awareness to cyber threats and risks. The purchase of insurance is more than a Declarations Page or an “IF I need it” policy; it’s a resource invested in loss prevention.
Is your firm prepared? Download your Cyber Liability Self-Assessment to see where you truly stand.
To Bundle Cyber Liability or Purchase a Standalone Cyber Policy
Bundling cyber liability with professional liability insurance is becoming more common due to the ease of a single application, policy, and premium. However, this approach usually comes with reduced coverage and higher risks.
Many insurance carriers recognize that business owners are reluctant to purchase a separate policy, so they are taking the initiative to offer add-on cyber options. However, it is important to understand that these options can be limited in both limits and coverages.
Selecting a standalone cyber policy with comprehensive coverages and quality rating is key. One major advantage of standalone cyber liability insurance is higher coverage limits. These policies typically start at $1 million, but given the average 280-day recovery time and $9.4 million average cost of a data breach in the U.S., even $1 million may be minimal. But it is a starting point.
$1 million coverage could save your law firm from sinking after a cyberattack. Various reports say the average cost per breached record is from $165-180. Multiply that by the number of client records you store to get a good idea of what limits may suit your law practice. Consulting a knowledgeable agent can provide deeper insight into tailored coverage options that fit your firm’s unique needs.
Additional Cyber Liability Insurance Benefits and Considerations
When seeking coverage, consider the regulatory requirements in your industry and jurisdiction so you can be sure your policy includes the necessary protections. Look for a cyber liability policy that includes both first and third-party coverages to ensure you are protecting your business from direct losses to your firm and claims made by clients or other third parties affected.
Cyber liability insurance carriers also offer tools and resources to policyholders to promote and encourage best practices. When opting to purchase a standalone cyber policy, you gain access to these resources, helping you minimize exposure and leverage the expertise needed to help you mitigate risk or defend against claims.
In contrast, bundling cyber liability coverage with your professional liability insurance means relying on a professional liability insurance carrier, whose primary expertise is handling professional liability claims, to defend against cyber-related claims. A highly rated standalone cyber carrier brings experience that other insurance lines simply can’t match.
Wrapping up
Cyber fatigue affects 42% of companies. This fatigue is an indifference to proactively defending against cyberattacks.
Part of combating cyber fatigue is taking the risks seriously enough to purchase Cyber Liability Insurance and have a third-party resource on call other than your carrier.
Cyber insurance carriers provide forensic and legal support, compliance guidance, loss prevention resources, and comprehensive coverage options to help businesses stay protected.
Additionally, having an in-house IT team on payroll or partnering with a third-party managed IT service company, like Pretect, can help you and your team avoid cyber fatigue by having the aid and expertise needed to keep your business on top of threats and proactive best practices.
