This post was originally run on October 27, 2014
Cyber Liability Insurance has been in existence since roughly 2000. I don’t think it qualifies as a “new” product, but according to Richard Betterley of Betterley Risk Consultants, Inc, Cyber Liability Insurance is new in the sense that it is fast becoming a key component of most commercial business insurance portfolios. After all, if JP Morgan Chase can’t prevent a cyber issue, what’s a smaller business to do? Here’s a quick lesson.
It starts with the demands
You’re probably very familiar with the use of Certificates of Insurance. After all, you were most likely required to present one every time you contracted with a new vendor. But now you may find that vendors are also asking for verification that you have an active Cyber Liability Insurance policy in place in addition to your business policies. In fact, according to The Betterley Report, many entities are buying Cyber Liability Insurance because they are required to do so if they want to do business with other vendors.
So now the question (and the concern) becomes: What Cyber Liability Insurance limits will be sufficient to satisfy vendors? Most experts will tell you that they don’t know yet, but they hope that vendors take a rational and conservative approach to their demands.
What you should consider
If you and your firm are not quite at the point of fully engaging a Cyber Insurance Liability policy, I suggest you consider the following:
There are three fundamental coverage types:
- Liability for loss or breach of the data
- Remediation costs to respond to the breach
- Coverage for fines and penalties levied by the State or Federal Government
Breaches themselves can be caused by:
- Failure to secure data
- An employee
- Acts by persons other than the insured
- Loss resulting from the theft or disappearance of “private” property – data that resides on a laptop or data storage media.
Why most businesses seek Cyber Liability Insurance
Many surveys around the topic of cyber liability indicate that the number one reason businesses seek out Cyber Liability Insurance is to protect them from the costs associated with remediating the effects of a data breach itself. Think about it. Many organizations that suffer a data loss may be required to notify their customers of the data loss. Depending on the number of employees, clients and vendors, this process can become very, very expensive. In addition, companies are also concerned about any negative impact on their reputation, and as a result, often offer their customers a credit monitoring service. This too can become very costly.
My final thoughts
Remediation coverage offered through a Cyber Liability Insurance policy can provide crisis management services, notification to potentially affected customers, credit monitoring and costs to re-secure your data. There’s no reason to delay – consider Cyber Liability Insurance as a key component to your overall insurance portfolio as it is fast becoming a standard coverage requirement for doing business with others.