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What to Consider When Purchasing Cyber Liability Insurance

What to Consider When Purchasing Cyber Liability InsuranceThe message is loud and clear: Today, data breaches and network security issues are becoming increasingly more commonplace. Now it’s time to look at purchasing Cyber Liability insurance if you haven’t done so already. If you have insurance but are unsure whether your coverage is robust and comprehensive enough to respond to the various cyber exposures that exist, now is also the time to have Cyber insurance professionals review your program. What considerations should you contemplate when buying Cyber Liability coverage?

  • Evaluate your unique risks to understand the nature and extent of the exposures your company faces. Financial institutions have different exposures from retailers who have different exposures from schools or healthcare facilities. Your policy should be tailored to cover your specific exposures.
  • Understand your existing coverage and what gaps may exist to know where you are exposed and the type of coverage you need.
  • Purchase what you need. There are many types of Cyber policies on the market today with some broader than others. Whether you need all the coverages offered or some additional features again depends on your exposures. A professional well versed in Cyber insurance will be able to assist you with this.
  • Review appropriate limits and sublimits to determine what to secure. Compare the anticipated costs associated with a data breach with limits of liability available and the related costs. The costs of responding to a data breach can be significant. Estimates vary, but according to an IBM report released earlier this year, the average cost incurred for each lost or stolen record containing sensitive and confidential is $154. You should try to match the company’s limits of liability with your realistic exposure in the event of a cyber loss. Moreover, most Cyber policies impose sublimits on some coverages, such as for crisis management expenses, notification costs and regulatory investigations. Go over these sublimits to determine if you need to negotiate higher limits.
  • Understand what activates coverage under your Cyber policy. Some policies are triggered on the date the loss occurs, while others are triggered on the date that a claim is made against the insured. In order to provide proper notice, you need to understand how coverage applies under each policy you purchase.
  • Know the policy exclusions. How a policy responds will depend on not only what is covered but also what is not. Policy language in a Cyber policy is not standardized and may contain exclusions that need to be addressed.
  • Talk to a professional about getting additional cyber enhancements/coverages. This can include retroactive coverage to address breaches that occurred before the inception of the policy. Because breaches may go undetected for some period of time, it is important to purchase coverage with the earliest possible retroactive date. You may also want to consider coverage for acts and omissions by third parties. Because many companies outsource data processing or storage to a third-party vendor, it’s important that your Cyber insurance policy provide coverage for claims that arise from misconduct by one of your vendors. You should also assess your need for coverage for regulatory actions. A data loss may cause not only the loss of information, but also could result in state and federal regulatory actions against your company. You should consider whether your company’s insurance policy provides coverage for a regulatory investigation or a regulatory action arising from a cyber incident.

Axis Insurance Services can review these important considerations and others with you regarding your Cyber Liability insurance needs. We focus on providing Cyber coverage to a broad spectrum of industries and professionals and can custom a policy for you. We work with several leading insurance companies in the Cyber arena. Give us a call at (877) 787-5258.

 

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Blogged on: June 29, 2015 by Mike Smith
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