How cyber insurance can protect your business
Cyber insurance is a new tool used by business leaders concerned about the negative effects of unexpected technology challenges — such as hackers, viruses, problems with technology vendors, and intellectual property infringement — on profitability, customers, and the bottom line of their businesses.
Until recently, with every new development in e-commerce, information or network security, Internet technology, or cloud computing, there were few options to protect against the possibility of system failures, data loss, infringing content, or human error and the associated detrimental effects on one’s business. Insurance policies refused to pay out when confronted with a claim and began to exclude technology-related coverage from their policies. But now, in response to high demand and more frequent problems, many insurance companies are beginning to offer insurance plans dedicated to protecting against unforeseen technological issues.
While the plans and coverage vary greatly, for the following reasons, virtually all businesses can benefit from researching the options and considering the integration of some type of technology insurance:
1. Almost every business can benefit. Large corporations have more clients, more networks, more employees, and more things that can go wrong. Such organizations can more easily afford fully loaded technology and hardware coverage. Small corporations are more at risk for technology issues because they often rely on third parties to provide technology services, so focusing on a policy that protects against third-party failure is more essential than including all the bells and whistles for technologies the corporation may not control.
2. Cyber insurance can supplement your existing insurance coverage. The first step in researching cyber insurance is understanding what is covered by your current insurance policies. For example, computers and other physical equipment may already be protected by a manufacturer warranty, but your company may not yet have secured a policy protecting against network damage by hackers. To enhance your organization’s protection without duplicating coverage, understand your needs internally and work with your insurance carrier to ensure that your cyber insurance policy contains only the elements that are not already covered.
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3. An ounce of prevention is worth a pound of cure. While there is little information about cybersecurity breaches available to the public, it is uncertain how effective current cyber insurance policies are, and even whether policies are being purchased or if companies are filing claims against the policies. For some organizations, preventing damage, or being able to stay afloat financially while systems are down and reporting requirements in the case of a breach are fulfilled, is well worth the cost of investing in a cyber insurance policy.
Because cyber insurance policies are so new to the market, insurance companies are typically open to negotiation on the content of the policies, as there are few standards established in the sector to date. Be sure to engage legal counsel who understands your business and the potential cybersecurity risks your organization may suffer. A representative who can negotiate for maximum protection is essential to ensure your business has the security it needs for a reasonable cost, so that when a cybersecurity issue arises your business has the tools it needs to protect itself and its assets.
Ariane C. Strombom is an attorney with Whyte Hirschboeck Dudek, S.C., where she practices corporate, technology and health care law. She can be reached at astrombom@whdlaw.com.
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