From the December 19-26, 2011 issue of National Underwriter Property & Casualty • Subscribe!

#6 Cyber Liability Emerges as Key Coverage for Digital Age

Emerging market niche provides opportunity for agents, brokers

While the words “sexy” and “insurance” seldom appear in the same sentence, cyber liability changed that in 2011.

Speaking about coverage for data-breach risk, Jake Kouns, senior director of technology and a data-privacy underwriting expert at property-and-casualty insurance holding company Markel, said in October, “It’s the new, sexy insurance. There are 30 carriers now writing it.”

The reason for this inrush of underwriters, of course, is that the digital storage and transfer of data is a critical part of doing business today for a huge—and constantly growing—swath of industry sectors. Insurance companies, banks, asset managers, retailers and, as Sony reminded us this spring, even game makers—they all handle private financial data.

And it’s not just hackers, viruses and phishing emails that put data at risk. Security breaches can just as easily be caused by lost or misplaced files or even mishandled waste. A breach that results in a client’s data being stolen and used in a damaging way can lead to substantial third-party liability claims—and government penalties.

A report from Lloyd's and technology company HP earlier this year warned that businesses becoming more reliant on technology will face more complex and damaging digital attacks as sophisticated criminals quickly adapt their methods to steal from, disrupt and spy on businesses.

Larger companies have been attuned to the risks of data-poaching and Web-site shutdowns for a while now—and many have stopped inquiring about coverages and have actually started buying policies. Why cyber liability could prove to be a major new business opportunity for agents, brokers and carriers is that the risks of expensive data breaches very much extend to small and midsize businesses as well.

Indeed, it is companies outside the Fortune 1000 that could find it very difficult to recover from a data breach without the right insurance, says Kouns, who also serves as chairman/CEO of the Open Security Foundation—a nonprofit public organization that seeks to help businesses minimize their information-security risks.

While cyber coverage has moved from an afterthought to a front-burner issue for many risk managers this year, the types of coverages being offered are still all over the map. Policies can cover everything from helping reconstitute data to the public-relations expenses needed to repair a damaged reputation.

Prices, too, are evolving—and are perhaps still too low. “Right now you can get a policy with a $1 million limit for $1,500 in premium,” notes Kouns. “That is worrisome. It’s too cheap. Companies will buy the coverage and think they don’t need to do anything to secure their systems.”

Even though cyber risk is everyone’s problem, the Zurich-sponsored survey “A New Era in Information Security and Cyber Liability Risk Management” in October showed that IT personnel are the ones who are generally considered (by 73.2 of the respondents) to be responsible for protecting against such threats. Only 13.2 percent believed it is the risk-management/insurance department’s responsibility.

Page 1 of 2

Resource Center

View All »

Increase Sales Conversion with this Complimentary White Paper

This whitepaper will share proven techniques - used by many of the industry's top producers...

D&O Policy Definitions: Don't Overlook These Critical Terms

Unlike other forms of insurance where standard policy language prevails, with D&O policies, even seemingly...

Environmental Risk: Lessons Learned from Willy Wonka and the Chocolate...

Whether it’s a chocolate factory or an industrial wastewater treatment facility, cleanup and impacts to...

More Data, Earlier: The Value of Incorporating Data and Analytics...

Incorporating more data earlier in claims lifecycles can help you reduce severity payments by 25%*...

How Many Of Your Clients Are At Risk Of Flood?

Every home is vulnerable to flooding. Learn four compelling reasons why discussing flood insurance with...

Gauging your Business Intelligence Analytics Capabilities and the Impact of...

Big Data, Data Lakes and Data Swamps, How to gauge your company's Big Data readiness....

Extending Contact Center Capabilities Across the Insurance Enterprise

Today advancements in technology are making a big impact on business and society. To yield...

Drug and Alcohol Testing Requirements

In this two-part series, NBIS Risk Management team will break down the requirements to assist...

Why Cyber Liability is Essential for Human Service Organizations

For traditional low-tech operations, information is often compromised in ways that don't involve technology. Access...

A Solution for Large Commercial Habitational Accounts

6 Reasons to place your LARGE Habitational Accounts with Dauntless.

Claims Connection eNewsletter

Breaking news on disasters, fraud, legal trends, technology, and CE initiatives for the P&C claim professional – FREE. Sign Up Now!

Claims-Handling Guidelines

Claims Magazine is providing the following free guidelines and regulations in order to help adjusting professionals stay abreast of each state’s unique property and casualty claim-handling requirements.

View our State Guidelines »

Advertisement. Closing in 15 seconds.