What Does Cyber Liability Insurance Cover?

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Businesses that create, store and manage electronic data online, such as customer contacts, customer sales, personal information and credit card numbers, can benefit from cyber insurance. In addition, e-commerce businesses can benefit from cyber insurance because downtime due to cyber incidents can result in lost sales and customers. Similarly, any business that stores customer data on a website can benefit from the liability coverage offered by cyber insurance policies. Cyber insurance is a way to insure businesses and individuals against Internet-based risks. Cyber insurance typically includes indemnity for claims related to data breaches, such as errors and omissions.

The development of such actuarial data is hampered by inadequate disclosure of cyberattacks by those affected. However, after a major malware incident in 2017, Reckitt Benckiser released information on how much the cyberattack would impact its financial results, leading some analysts to believe that the trend is toward more transparency in cyber incident data. Cyber security and privacy insurance is often confused with technology errors and omissions (tech E&O) insurance. Unlike cyber and data protection insurance, tech E&O coverage is designed to protect providers of technology products and services, such as computer software and hardware manufacturers, website designers, and companies that store corporate data off-site. However, technology E&O policies contain many of the same underwriting provisions as cyber and data protection policies.

Cyber insurance should not be considered a substitute for effective and robust cyber risk management. All companies are required to purchase cyber insurance, but should only consider doing so to mitigate the damage caused by a potential cyber attack. Your cyber insurance policy should complement the security processes and technologies you implement as part of your risk management plan. Traditional insurance policies often exclude cyber risks, which has led to the growth of cybersecurity insurance as a standalone coverage type. Potential customers include any business that accepts digital payments or stores personal information about its customers, including medical and financial data. Like other insurance policies, cyber insurance often includes a war exclusion clause that specifically excludes losses from acts of war.

It also covers losses due to cybersecurity breaches, intellectual property theft, and loss of privacy. Cyber insurance is a risk management technique that transfers the risks of network users to an insurance company for a fee, i.e., the insurance premium. Examples of potential cyber insurers could include multifactor authentication Internet service providers, cloud providers, or traditional insurance companies. Proponents of cyber insurance believe that cyber insurance would lead to the design of insurance contracts that shift an appropriate amount of self-defense liability to customers, making the cyber space more robust.

In this case, the term “self-defense” means a network user’s efforts to protect their system through technical solutions such as anti-virus and anti-spam software, firewalls, use of secure operating systems, etc. Cyber insurance also has the potential to be a market solution that can be aligned with the economic incentives of cyber insurers, users (individuals/organizations), policy makers, and security software vendors. Cyber insurance helps protect your business from financial losses caused by cyber attacks and data breaches. An Errors and Omissions (E&O) policy can protect small businesses that provide technology services when cybersecurity insurance does not provide protection. A technology E&O policy kicks in when a company’s product or service results in a cyber incident that directly affects a third party.

The question is not if your business will be affected by a security breach, but when. Travelers cyber insurance policyholders can also access tools and resources to manage and mitigate cyber risks, both before and after a breach. A cyber insurance policy, also known as “cyber risk insurance” or “cyber liability insurance,” is a financial product that allows companies to cover the cost of recovery after a cyber-related security breach or similar event. Some cyber insurance policies cover the cost of providing credit monitoring services to customers affected by a data breach.

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