Cyber Coverage, It’s A Whole New World

Cyber Liability Coverage

With all the different security and privacy issues that businesses face in this current tech-heavy environment, the insurance carriers have grappled with what is the best way to respond to these threats. Cyber liability coverage has evolved since it was first introduced in the late 90’s from a tech and omission liability policy to a policy tailored to companies of all sizes and descriptions. The insurance carriers have had to adapt to the insured’s new needs for more coverage then what was originally available and respond with appropriate coverages, all along trying to anticipate the new exposures that come with the fast changes that happen in the technology field.

Privacy Coverage & Network Security

Cyber Liability is not a standard insurance product. Many times the policy will be tailored to meet a business’ unique needs, but it protects against two types of risk, first-party and third-party risks. Reviewing the first-party standpoint, it could cover items like crisis management, hiring a public relations firm to manage a data breach incident, the costs associated with a forensic analysis, if your company was infected with a computer virus that destroys business software and data, the cost of hiring a firm to repair and restore your company’s computer systems, and the loss of business income resulting from a data breach. Third party coverage refers to Privacy Coverage and Network Security; this may cover losses resulting from breaches in network security or unauthorized access events.

“When selling a business, liability is a big factor. Will the new owners inherit a legal mess from the previous owners – will they be on the hook for the liabilities generated by the business prior to their taking over? Working with a business insurance broker to mitigate your risk can help make your business more saleable down the line. Businesses who have been operating without proper insurance may carry more risks than an investor or buyer is willing to tolerate.”
Phil Reese, Arizona Business Broker

Privacy Regulatory Proceeding Coverage

Another area is Privacy Regulatory Proceeding Coverage. This generally is provided as a sub-limited part of the privacy liability coverage; which may cover costs resulting from a civil, administrative or regulatory proceeding that alleges the violation of a privacy law.

Media Liability Coverage

The last area is Media Liability Coverage. This would encompass conventional media and web 2.0 content produced by the insured to be used in marketing online or offline. Interestingly, with all the reports of companies being hacked across the country, many businesses seem very confident in the firewalls and virus protections they’ve already installed and seem to view cyber liability coverage, also known as Internet liability or network and information security liability coverage, as a luxury and not a necessary coverage.

In talking with many of the industry experts, they strongly disagree with that assessment and feel that the company is extremely overconfident. One of the biggest risks for a company is unauthorized access from a virus, allowing a third-party to breach the system. Since cyber liability insurance is not a conventional insurance product, the pricing of policies can be very diverse, making comparisons among the various cyber liability products difficult and sometimes confusing. It’s very important to note also that premium is based on the sales of a company; the higher the company sales mean more exposure and therefore a larger insurance premium.

Cyber liability is not something that has predetermined timelines like the flooding that comes with storms and interrupts business on and off the web. It’s a claim that could evolve over a much longer period of time. A good idea is to sit down and take a good hard look at your business, your data and how valuable it is, and what are costs you might incur if something went wrong. If absorbing the losses could wipe your company out, you’re a good candidate for cyber liability insurance. If your company possess what we refer to as valuable data, especially if there are associated with regulated personal, financial or medical information about clients or consumers, you may be wise to consider adding “privacy” coverage for the potentially onerous costs of a data breach. If your company would struggle to survive an extended website or computer-network shutdown, you may need network-security coverage. And if your company hosts any online discussions and risk libel or false-claim accusations, media coverage may be the proper coverage for you.

As you see, with the changes that happen in the tech world and how fast they happen, having a cyber liability policy may be the coverage for your company. To further explore all the coverages available to your company, it would be wise to sit down with a professional Arizona insurance agent and find the right coverage for you. We would welcome the opportunity to be that agent.