Cyber Liability Insurance: Does Your Company Need It?
Protect Yourself from the Financial Consequences of Attacks with Cyber Liability Coverage
With the rise of organizations using, storing, sending, and receiving sensitive electronic data, cyber-crime has also surged. Organizations are turning to various forms of cyber protection, ranging from infrastructure enhancements and managed security solutions to tailored insurance options. Those concerned with financial damage caused by cyber-attacks may be considering cyber liability insurance, which can help to offset the financial damages to an organization from unwanted attacks and data breaches. However, cyber liability insurance may not be a requisite panacea for all cyber-crime, and carriers will require an organization to meet certain baseline security standards (e.g. infrastructure and processes) to qualify for coverage. Read on for more information on cyber liability and relevant issues your organization should consider in evaluating whether to obtain cyber coverage.
What Is Cyber Liability Insurance?
Cyber liability insurance covers certain liabilities and financial losses resulting from cyber-attacks. In the event of a data breach, relying solely on an organization’s general liability insurance will likely not be sufficient. General policies usually exclude cyber protection and coverage for damages from cyber-crime. In addition to legal expenses, cyber liability insurance can help cover the costs of alerting customers about data breaches, recovering compromised data, fixing damaged computer systems, and restoring the personal identities of affected customers. Many insurance providers offer similar types of cyber liability coverage, with the most common being First-Party Coverage and Third-Party Coverage.
First-Party Coverage
First-party coverage addresses an organization’s own damages from cyber losses. In terms of cyber liability policies, they may include several different property and crime coverages, such as loss or damage to electronic data, communications expenses, costs of investigations, cyber extortion losses, executing PR campaigns, providing credit monitoring, and other recovery-related activities. Substantially, first-party cyber liability insurance lessens the financial burden of an organization that is directly under attack.
Third-Party Coverage
Unlike first-party coverage, third-party coverage covers legal expenses when a company is blamed for causing another firm’s cyber losses. These coverages apply to damages or settlements resulting from covered claims, as well as assisting with a company’s defense. Such claims may include network security liability (insurance covering lawsuits due to a data breach or inability to access data on a system) and network privacy liability (insurance covering lawsuits based on the failure to protect stored sensitive data). Additionally, third-party coverage may address electronic media liability as well as errors or omissions liability. Cyber liability policies are largely claims-made, meaning that policies cover claims made against you only while they are enforced.
The Takeaway
No matter the current size and scope of your organization, it’s critical to prepare against cyber-attacks. There are countless benefits to being a step ahead, and one can never be too careful as data breaches become more frequent and severe. Cyber liability insurance is a solid tool to protect an organization against potentially catastrophic financial damages emanating from cyber-crime. However, cyber liability insurance is only one arrow in an organization’s cyber-crime defense quiver, which may not be appropriate for every organization.
Both in conjunction with and separate from such coverage, every organization must take all necessary steps to optimize infrastructure security, business continuity planning and employee cyber threat awareness training. An organization’s infrastructure and employees are their front line defenses against attacks. Frankly, without those foundational items handled, it’s unlikely a carrier will provide an organization with effective cyber coverage.
Managed service providers, like Atlantic, Tomorrow’s Office, offer a broad range of products and services (like infrastructure refreshes, patch management, backup disaster recovery, managed security suite) that add significant value to an organization’s IT security framework, helping to protect against cyber disasters in the first place. Additionally, such products and services can help your organization avoid coverage denials, costly coverage exceptions, and exorbitant premiums, rendering cyber coverage a viable option.
As a Managed Service Provider, Atlantic provides 24/7 monitoring and reactive support. Don’t jeopardize your organization’s reputation and even existence by failing to protect against cyber-attacks. Contact Atlantic today to discuss cyber liability and managed security solutions with our team of experts.
