On Jan. 10, Target announced it would offer one year of free credit monitoring, identity theft protection and zero liability for the cost of fraudulent charges to all its customers. Offering this is a smart move on Target’s part to protect its credibility and to maintain good customer relationships. But offering all of this isn’t cheap.
According to the Ponemon Institute’s 2013 Cost of a Data Breach study, the average cost of a breached record is $188, which includes both direct and indirect expenses incurred by the organization. Even just the indirect expense of communication—sending customers notification of the incident and setting up a call center for customer inquiries—can cost a lot.
Target has at least $100 million of cyber insurance coverage. If you multiply the number of customers affected by the breach by the average cost of a breached record, the total cost of this massive breach exceeds the limits of its policy. But the insurance will help cover a big chunk of the customer notification and credit monitoring costs, as well as expenses related to hiring a computer forensics investigator, fines and more.
If a data breach happens to your company, how would you pay for the damages? Contact Warren G. Bender Co. to learn more about cyber insurance.