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
Comments

Resource Center

View All »

Complimentary Case Study: Helping achieve your financial goals By:...

Find out how a Special Investigation Unit used TLOxp to save the company money and...

Do Your Clients Hold The Right CDL License?

Learn about the various classes of CDL Licenses and the industries that are impacted by...

Integrated Content & Communications: A Key Business Issue For Insurers

Insurers are renewing their focus on top line growth, and many are learning that growth...

High Risk Insurance Coverage in the E&S Market

Experts discuss market conditions, trends and projected growth in a rapidly changing niche.

Top E-Signature Security Requirements

This white paper covers the most important security features to look for when evaluating e-signatures...

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

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.