There are many scenarios that can cause business interruption, including fires, disasters, theft, cyberattacks, or the loss of a critical supplier. No matter the cause, it takes time and money to undo the damage associated with these scenarios. And, when a business can’t operate normally, the cost of lost revenue and bills starts to pile up.
Business interruption is a type of operational risk that each of your clients face and should plan for. In the wake of the pandemic, this reality couldn’t be starker for many organizations, many of which are experiencing unprecedented disruptions. Cyber business interruption is increasingly a concern with the recent uptick in malicious activity, yet many businesses are not prepared to meet the threat.
Read on to learn more about business interruption coverage and how ProWriters can assist you in finding the perfect insurance solution for different client needs.
What Are The Different Types of Business Interruption?
Understanding how insurance policies categorize a given business interruption incident is crucial for ensuring that your client has adequate coverage, no matter the type of event involved. Though different carriers have different terminologies, you should be able to explain these three types of business interruption:
1. Traditional Cyber Business Interruption.
This is when a hack leads to downtime in your business operations, whether due to ransomware, a data breach, denial of service attack, or another cyber threat.
2. Dependent Business Interruption.
This occurs when a critical third-party vendor goes down, causing you (the business) an interruption. For example, EPIC is an electronic medical record system used to run hospitals. Should a cyber event occur at EPIC, this would cause serious downtime at the hospitals that rely on it.
3. Systems Failure.
This is any outage caused by physical damage, such as natural disasters, or due to an employee error. A systems failure might happen at the same time as a cyber interruption or a dependent business interruption (#1 and #2).
Types of Insurance That Do & Don’t Apply to Cyber Business Interruption
Many of your clients may have the mistaken idea that general liability (GL) coverage would cover the costs associated with ALL types of business interruption. While general liability can cover dependent business interruptions, it’s not designed to cover interruptions due to cyber-related reasons. In short: any business that uses technology will have exposure in the absence of a dedicated cyber policy. Also, not all general liability policies necessarily include dependent business failure (#2) or system failure (#3). With the help of the experts at ProWriters, you can ensure that your clients are covered in any contingency.
Businesses that use technology should be sure to have adequate cyber business interruption coverage and appropriate limits since these are not included in a general liability policy. The experts at ProWriters can help you determine what appropriate limits would look like for your clients depending on their business type, size, and risks.
Cyber attacks have become a frequent cause of business interruption. Let’s look at how this happens and how cyber insurance can keep your clients protected.
How Can a Cyber Attack Lead to a Cyber Business Interruption?
Cyber criminals have become adept at exploiting weaknesses in computer systems, whether through hacking, phishing, or other methods. There are several types of attacks that could incapacitate business activities, including:
- Distributed denial of service (DDoS) that make the website inaccessible to both employees and customers.
- Ransomware that encrypts a company’s data until a sum of money is paid to the attacker.
- Viruses or worms that delete critical information on a business’ hard drives.
- Malicious code that makes the website impossible to use.
- Business email compromise, when the attacker takes over an account email.
It’s easy to imagine how any one of these events could cripple a company’s ability to do business. With the pandemic, we’ve seen an uptick in malicious attacks as cyber criminals take advantage of a situation where many employees are working from home.
Employees are inadvertently exposing company passwords by doing their work through unprotected networks, for example. Phishing attacks have also become more common as cyber criminals capitalize on fears of the coronavirus. COVID-19 has been used as a phishing lure against businesses in various sectors, with emails often using the branding of retailers or public health organizations.
Unfortunately, many small businesses don’t have the manpower necessary to detect the problem and fix it, which often prolongs the business interruption. And, dependent business interruptions (when your client’s vendor is attacked) can also have a major impact by causing a shutdown that your client has no control over. Such an event could be devastating to your client in the absence of cyber liability coverage.
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Again, general liability will not cover business interruption losses associated with a cyber event. A good cyber liability policy can fill that void by covering expenses such as:
- Lost income due to the cyber event.
- Profits that would have been earned if the event had not occurred.
- Operating expenses that must be paid, even though business operations are down.
And, of course, a cyber policy should typically also cover the costs of data losses, IT forensics, legal actions associated with the event, notifying customers, and sometimes even public relations around the event.
Partnering with ProWriters for Insurance Solutions
If you are a broker or insurance agent seeking to provide the best cyber business interruption coverage to your clients, we invite you to tap into the deep institutional expertise of ProWriters.
We are working hard to streamline cyber liability across the industry, especially through our proprietary ProWriters Cyber IQ Platform. The platform enables you to compare quotes from multiple carriers at the same time. You can also call our customer service team for support if your clients have further questions! To learn more, you can download this free eBook with our latest tips on selling cyber insurance.