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Why Securing Cyber Insurance from Specialists is Important


Not All Cyber Policies Are Created Equal, Respond to Specific ExposuresNot All Cyber Policies Are Created Equal, Respond to Specific Exposures

While Cyber Liability, also known as Privacy & Network Security insurance, has been in existence for a decade, it’s over the past few years, as a result of high-profile cases and the frequency of data breaches, that the critical importance of this coverage has come to light for all business across all industry sectors. Today, there are more than 50 insurers that offer Cyber insurance with demand increasing for the coverage 21% between 2012 and 2013.

What’s important to note, however, is that there are a variety of policies available which means, that depending on your industry, your specific operation and exposures, you need the professional guidance of an insurance advisor that has the breadth and depth of experience and knowledge to secure the right coverage for you. Without the correct policy in the event of a breach or other cyber exposure, there could be significant consequences and expenses for which you won’t have coverage. The challenge is having an understanding of the impact of cyber risks on an organization.

Including the costs associated with incident response, customer notifications, possible non-compliance fees, legal costs, etc., as well as costs in terms of customer loss, brand damage, and decreases in stock price and bottom-line finances. This includes identifying and assessing both short- and long-term risks to the business and the type of policy that will best address these risks. Short-term risks that require insurance include: lost data and records management, lost customers, financial loss (in the case of theft), immediate loss in profits, notification of those affected by a breach, identity theft protection, reissuing of compromised cards (if credit card data was stolen), attorney fees, and short-term drops in investment. As we discussed in previous articles, there are steps businesses must take to advise victims (clients, patients, employees, students, faculty, depending on the organization) of a data breach. These notification steps vary by state and are becoming increasingly more expansive in terms of defining what’s considered sensitive information.

California and Florida, for example, both mandate reporting of data theft within 30 days when more than 500 state residents are affected. This requires time and money, which should be factored into what a Cyber Liability insurance policy should include.

There are also long-term risks when it comes to cyber crime, the effects of which may not be immediately clear. According to a report by the U.S. House Small Business Subcommittee on Health and Technology, “Protecting Small Businesses Against Emerging and Complex Cyber-Attacks”, 60% of small businesses close their doors within half a year of being victimized by cyber crime. Some long-term risks that must be contemplated include: brand damage, attorney fees during investigations and trials, updating systems, forensics to find and fix vulnerabilities, updating systems and credit monitoring.  For example, a cyber crime can cause long-term damage to one’s brand and result in loss of customers for good. And, although this is difficult to quantity for insurance purposes, it needs to be considered when looking at the type of policy to be secured.

In addition to the type of Cyber coverage to purchase, another area to review carefully is the amount of insurance to purchase. This requires close examination to make sure your limits are in line with how much of the expenses your business can bear in the event of a breach.

The professionals at Axis Insurance Services specialize in placing Cyber Liability insurance for a broad range of industries. We work closely with our insureds and carrier partners to secure a policy that addresses the risks a particular organization face. We’d be happy to review your business cyber exposures and present you with options. Please give us a call at (877) 787-5258.

Sources: NY Times, SurfWatch

 

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Blogged on: September 25, 2014 by Mike Smith
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