If there is anything that remains consistent in cyber, it’s that you can always expect change. As we face new cyber attacks every day, the insurance coverages to protect us from these attacks have also been forced to adapt throughout our developing digital age. The first cyber and internet policies of the late ’90s are nothing like the cyber policies we see today. And, the broad term “cyber liability” doesn’t carry the same meaning it once did.
As our reliance on technology has increased, so has the risk of a cyber attack. While cyber policies once provided basic coverages, such as liability of a third-party breach, the policies available today provide comprehensive coverage for both first-party and third-party claims. Now, cyber liability is only a portion of what makes up a cyber insurance policy.
First-Party vs. Third-Party Coverages
To understand the difference between the terms: cyber liability and cyber insurance, it’s important to understand the difference between first-party and third-party coverages.
This is a claim the policyholder brings against their own policy.
For example, a policyholder suffers a data breach and they have to outsource an IT forensic team to locate the source of the break, re-secure their network, and confirm what information was potentially compromised. First-party coverage reimburses the policyholder for this kind of out-of-pocket expense, less their deductible.
This is a claim brought by someone who is not the policyholder for damages that the policyholder is legally liable for (hence the term Cyber Liability ).
For example, a policyholder suffers a data breach and the hacker gains access to their customer’s private information. The policyholder will likely be held liable for this breach of personally identifiable information (PII) and may face breach of contract, negligent protection of data, and more.
While cyber liability coverages were once the only option available, now, cyber liability coverages are only one piece of the coverages available under a cyber insurance policy.
Cyber Insurance of Today
The first cyber policies are nothing like the comprehensive coverages available today. Historically, when technology was limited, the cyber risk associated with using the technology at the time, was also limited. Today, we rely on technology in almost every aspect of our lives, making the risk of a cyber attack extremely high.
A cyber insurance policy now includes both these first-party and third-party coverages, as well as a few additional elements that can be incorporated.
First-Party Cyber Coverages
These cover the policyholder’s own out-of-pocket costs they may face as a result of the breach. First-party coverages have grown, as over half of the claims brought forward under a cyber insurance policy are first-party claims.
- IT Forensic Costs
This covers the cost to determine what information may have been breached or how a hacker gained unauthorized access to sensitive data.
- Notification Costs
This covers the cost to notify individuals, businesses, regulators, and to run a call center related to the notification.
- Credit Protection Costs
This covers the cost to provide credit-monitoring services to the affected parties who may suffer a loss to their credit scores.
- Crisis Management Costs
This covers the cost of potential media liability, including the cost to hire a public relations firm.
- Crime and Social Engineering
This covers the cost of a potential involuntary parting of funds (when a stolen username and password are used to direct funds out of your account).
Third-Party Cyber Coverages
Cyber liability insurance covers potential claims brought against the policyholder by third-parties who have been affected by the cyber extortion or attack. This includes:
- Claims related to the breach of Personally Identifiable Information (PII):
- Credit card numbers
- Social security numbers
- Bank account information
- Personal health information
- Sensitive corporate information
- Third-party claims related to:
- Breach of contract
- Negligent protection of data
- Network security breaches
- Transmission of software viruses
- Denial of service attacks
Additional Cyber Coverages
The benefits of a cyber insurance policy can go beyond just first-party and third-party coverages, including:
- Multi-media coverage, such as online advertising, intellectual property, copyright and trademark infringement, and libel or defamation claims.
- Cyber extortion coverage for a potential ransomware demand, which cyber hackers may make while holding a policyholder’s network or data hostage until their demands are met.
- Cyber business interruption for companies who rely heavily on the internet or their network for revenue.
Why Cyber Insurance Is Important
As cyber attacks continue to evolve and hackers discover new ways to infiltrate important network systems and databases, it’s becoming harder and harder to protect against these attacks. In addition, as our reliance on technology increases, the risks we face should an attack occur, have become more and more serious. Now, medical devices (such as those implanted in a heart), the driverless vehicle on the road, and the security camera in a child’s bedroom can all be compromised.
More and more companies are taking control of their cyber risk by purchasing a cyber insurance policy.
While IT security and risk prevention measures are extremely important, the chances of a cyber attack successfully infiltrating a business’s network are simply too high not to have the right coverages in place.
How ProWriters Can Help
ProWriters offers over 20 years of experience in cyber insurance. With the best service available in the industry, we make the process of buying and selling insurance the easiest it’s ever been.
With our Cyber IQ Comparative Rate Portal, you can quote and compare policies from multiple carriers in a matter of minutes.
In addition, ProWriters offers a number of free resources for agents and brokers, including our latest eBook, Cyber Exposure: What’s the Real Cost? Learn more about the risks your clients may be facing and how best to protect them with a cyber insurance policy.
To get started today, contact us or call us to speak with a ProWriters expert at 484-321-2335.