Why Insure Against Cyber Exposures

Cyber exposure has fast become a major risk for companies big and small. Many business professionals today rely heavily on technology to help manage their company’s operations and infrastructure, as well as to store their valuable data. The downside of all of this technology, while improving a company’s efficiency and ease of doing business, is that it leaves these companies vulnerable to cyber liability exposures. Cyber Security and Privacy Liability coverage are two examples of ways to protect policyholders against many third party cyber liability exposures.

Three of the main cyber threats and their consequences

1. Network Security Liability

This is a third party liability risk associated with the unauthorized access, theft or destruction of data within the insured’s computer network or other electronic information system. It can include denial of service attacks, virus transmissions and electronic security breaches. It could be due to an internal or external attack, and may also include liability claims arising out of the theft of mobile computer equipment, such as laptops, in order to appropriate data illegally.

2. Privacy Liability

This liability risk is associated with theft of non-public personal information in electronic form and liabilities involving the failure to comply with privacy laws, or those regulations that govern the control, collection, access, transmission, use and accuracy of that information. There are severe costs associated with claims or losses, such as notification of affected parties of the breach, as well as fines and penalties for permitting such a breach.

3. Electronic Media Liability

This risk is associated with the display of electronic content on a client’s website. Any information in the form of words, sounds, numbers, images or graphics in electronic form is considered electronic content, and also includes advertising, video, blogs, bulletin boards and chat rooms.

In addition to potential third-party liability damages, clients could face additional risks for direct costs from any number of sources. State laws mandate businesses to notify anyone whose private information may be at risk immediately after a breach occurs. Because the company’s reputation is likely damaged as well, it may require additional spending on public relations services to help restore its good name.

There may also be fines and penalties assessed as a result of regulatory action, all the more reason to insure against cyber exposure, which can wreak havoc on a company that has been victimized.


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