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Understanding Cyber Risk Policies


We’re seeing an increase in awareness and requests for cyber risk liability insurance, and we thought it would be a great time to discuss it. Cyber risk is an issue that affects every individual or company that conducts business over the Internet. At some point every Internet-related business must ask themselves two key questions: What are my particular cyber risks? Why should my business be covered by a cyber risk policy? A cyber risk insurance policy is an errors and omissions insurance policy that covers liability for professionals who encounter specific risks due to using the internet/computer for their business – which is pretty much everyone. Consider email, or online documents, for example – then there’s the “cloud based” systems that are growing in popularity. For an Internet-based business, this may include cyber extortion, unauthorized disclosure of client data or other sensitive information, and hacking. An unauthorized disclosure could be a simple breach of your computer system, the loss of a laptop containing confidential information, or an employee copying proprietary data onto a disc or jump stick without permission.
A cyber risk policy is separate coverage from your standard general liability or property insurance, and it helps protect you and your company from bearing the full cost of a potential lawsuit. The consequences of an unauthorized disclosure can be quite serious, and may damage a company’s reputation almost beyond repair. Although each state has its own requirements in the case of an unauthorized disclosure, most require notification of all parties affected and the provision of at least one year of credit reporting. For a large company, the cost of hiring marketing consultants, accountants and IT experts to meet the requirements of state reporting and damage control efforts can reach into the millions. A cyber risk insurance policy makes sense for any business that may encounter such exposures.

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Blogged on: May 31, 2011 by Mike Smith
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