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Insurance at the Forefront as Cyber Crimes Go On: SEC Requires Disclosure of Relevant Coverage


SEC Requires Disclosure of Relevant Coverage

At Axis Insurance Services, we’ve been focusing on Cyber crime and the need for Cyber Liability insurance. There’s a compelling reason for this: Sony, who experienced a data breach in 2011 had over 100 million customer accounts compromised and is projecting a loss that could run about $200 million. Unfortunately, Sony didn’t carry a Cyber insurance policy. Yet Sony is not alone.

According to research group Advisen, only about one-third of companies that they surveyed have purchased a Cyber Risk policy. To make matters worse, according to the Ponemon Institute, which conducts independent research on privacy, data protection and information security policy, the average cost of a data breach hit $7.2 million last year and cost companies $214 per compromised data record. This figure represents only the data breach. If a company’s intellectual property is stolen, just imagine what it could do to an organization.

Why do companies go without insurance? Many don’t want to talk about cyber attacks, according to a cybersecurity expert Robert Ackerman of Allegis Capital. They feel it will ruin their reputation. Some have chosen to self-insure, while others don’t realize they aren’t insured until it’s too late. A Commercial General Liability doesn’t cover cyber losses unless specifically endorsed. 

But this is changing as attacks are becoming more sophisticated and costly – and widely publicized. Just take a look at the most recent incident that came to light, which allegedly involved Chinese hackers of the U.S. Chamber of Commerce. According to reports, the hackers got their hands on everything stored on the Chamber’s systems including data on the business lobbying group’s 3 million members.

What’s more, due to new Security and Exchange Commission (SEC) requirements in October, companies are required to disclose “material” cyber attacks and their costs to shareholders. The guidance specifically requires companies to disclose a “description of relevant insurance coverage.”

Cyber insurance covers the cost of lost business, notification costs, credit-monitoring services, public relations, and legal and investigation expenses related to data security breaches. The policy may also cover class-action suits, regulatory investigations, civil fines, and extortion demands. Each company, depending on its exposure, has different needs, therefore a policy can be tailored in terms of coverage, amounts, deductibles, etc.

Give us a call at (877) 787-5258 to discuss your specific Cyber exposure. Remember, virtually all businesses that collect data are exposed to data breaches and can be targets of cyber crime.

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Blogged on: January 10, 2012 by Mike Smith
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