Technology errors and omissions insurance and cyber liability insurance both address cyber risk, but from different perspectives. We decided to write an article about the differences between tech E&O vs. cyber liability, and when these policies should be combined. Understanding how these insurances work will help you ensure that your client is getting the most from each type, and, that there aren’t any critical gaps in protection.
What is Tech E&O Insurance?
Technology errors and omissions insurance (tech E&O) is designed to cover providers of technology products and services. For example, companies that sell software offer technology products or those that provide data storage or website design fall into the technology services category.
Tech E&O insurance protects the company in the event that its tech-based services or products fail. It applies when a company makes a mistake or is negligent in providing their tech service, which causes financial harm to a customer. These errors can range from missing project deadlines to recommending inappropriate technology. When a client sues to recover their losses, technology E&O will pay for the legal expenses and indemnity payments, which include:
- Court costs
- Attorney’s fees
- Money paid for a settlement
- Legal judgments (what the judge orders you to pay)
- Related costs, such as court fees
Every technology company should buy a tech E&O policy that includes cyber coverage. Depending on the claims situation, coverage can get very complicated if a tech company doesn’t have both types. For example, if a software company has a cyber incident, they could be accused of negligence due to a failure in their services. But another technology company that has a cyber incident might be categorized as a cyber claim when it’s determined that there was no professional negligence.
You don’t want there to be any gaps in coverage if your client experiences an incident, and the best way to do that is for them to buy tech E&O that includes broad cyber coverage.
What About Cyber Liability Insurance?
In today’s digital age, virtually every company has to store and access the personal information of third parties. Data and technology are integral to the running of any company—from customer email lists to payment information. In the event of a data breach or cyber incident, cyber liability insurance covers the costs associated with a breach of third-party data or cyber incident. It pays for the costs of:
- Investigating a breach
- Notifying customers of the event
- Regulatory fines
- Credit monitoring to affected individuals
- IT forensic costs
- Public relations around the breach
- Ransom payments, business interruption costs, and more
This is the primary difference between tech E&O and cyber liability insurance. While technology E&O responds to a failure of a service/product, cyber insurance responds to a data breach or cyber incident for businesses that use technology, which is really almost any business today. It’s important, provided this insight, that every company have cyber insurance because nearly every company uses technology that could be compromised when experiencing a cyber event. Technology companies should additionally purchase tech E&O to cover their business in case of professional mistakes.
Packaging Tech E&O and Cyber
But what happens if a tech company’s software service fails, leading to exposure of third-party data? While a pure tech E&O policy would cover the service failure, the costs associated with the data breach may be excluded.
Even more importantly, though a cyber liability policy is designed to cover data breaches and cyber incidents, this particular event may not be included because it was caused by a service failure (not ransomware or other types of hacking). So, companies should package their tech E&O with cyber liability insurance to ensure that the policies will respond to any type of situation.
The key point here is that a quality technology insurance policy will cover both tech e&o as well as cyber. If a tech-related client asks you for cyber only, you need to explain why they need both. They need both because as a tech company, they may not be covered for certain claims if they only carry cyber insurance or only carry tech E&O.
Brokering Insurance with ProWriters
As an insurance broker, you are likely the most knowledgeable person your clients will talk to on the topic of cyber liability and tech E&O. To guarantee that your clients get the level of coverage they’re expecting, we encourage you to partner with us at ProWriters. At ProWriters, we are experts at navigating the complex insurance landscape. We work closely with agents and brokers to help them make sure their clients don’t encounter any coverage surprises if a breach or liability event occurs. Our goal is to give you peace of mind that you’re providing accurate, transparent information to your clients so they get the full protection they need.
How do we do this?
First, our customer service is unparalleled in the world of insurance. You can call our customer service line at any time to receive personalized attention. We are always ready and able to assist, including if you need us to talk directly to clients.
Second, we help you save time when quoting clients through our Cyber IQ Platform. We offer underwriting services on behalf of multiple carriers, meaning that our agents and brokers can go to one place to compare multiple quotes at the same time. These quotes include detail on the type of coverage offered in plain English so that you feel fully informed when you’re explaining policies to your clients.
Finally, we will soon be offering a Tech IQ Platform so that you can quote tech E&O policies for clients. This includes the possibility of bundling policies so that tech companies receive full coverage for any type of event. We’ll come alongside you every step of the way, providing our deep understanding of the nuances of insurance so that you can be effective in the work of educating and selling to clients.
Schedule a call with one of our insurance experts for more information.