cyber risk insurance
risks and exposures

As the use of new technology and the internet has exploded, so have new technology risks and exposures (“Cyber Risk”).  The primary Cyber Risk exposure to organizations is for breaches – the inadvertent release or theft of confidential information or data.  The information can be held in a variety for forms and locations, including both electronic data and paper files stored in an office, offsite or in the cloud. 

Confidential information can include credit card, social security and bank account numbers, and also other financial information and medical records.  Confidential information is also referred to as PII (“Personally Identifiable Information”) and PHI (“Protected Health Information”) depending on the type of information. 

The largest cause of data breaches is not hacking, but employee error.  Examples include lost laptops and the release of network security access information (passwords).  But hacking and other criminal activity is beginning to catch up.

Organizations are required to report breaches of confidential information to regulatory authorities in most states, and these notices trigger a notification to potential victims.  Most states now have strict requirements for notice from any release of personal information, particularly social security numbers, medical records and financial information.  The definition of a breach is spelled out in breach notification laws, and does not normally require the confidential information to be in the hands of a hacker.  The costs of these notifications can be high in both dollars and adverse publicity, and Cyber Risk Insurance is designed to mitigate these costs. 

Some underwriters feel that small to medium sized businesses present additional exposure because they are increasingly being targeted by hackers and criminals.  While they generally have fewer records and may present a more obscure target, their security resources are typically not as sophisticated as larger organizations.

To add to the complexity, different types of insureds have different Cyber Risk exposures and coverage needs.  Consider the data needs and cyber risk exposures of a businesses operating over the internet, a traditional retail shop, and a financial institution.  All have Cyber Risk exposures and insurance needs, but they vary significantly.

What does a breach cost?  Breaches can be expensive due to the volume of data and the notice requirements.  Breach costs vary widely, but one research institute has estimated that a typical breach costs approximately $200 per record.  Cyber Risk policies typically cover the direct costs to address a breach, plus legal expenses and settlements if you are sued.

Breaches are only one Cyber Risk exposure.  Other exposures include the costs associated with regulatory proceedings, liability for libel and slander, destruction of computer software, systems and data, costs associated with the replication of data, business interruption associated with a cyber-peril and cyber extortion.

One area of concern is bank account takeovers and the theft of money out of bank accounts (see Breaches & Claim Examples).  A software program called Zeus is a good example, and has been busily infecting computers and stealing the bank account access information of unsuspecting victims.  The program monitors keystrokes and sends the information to criminals who then use the information to steal money out of victim’s bank accounts.  One way hackers get the virus onto victims’ computers is through bogus emails.

We have a unique approach for providing comprehensive and competitive Cyber Risk Insurance to you for your clients.  To find out how, and for additional information, sales collateral, applications and indication forms, and for expert assistance with Cyber Risk Insurance, please contact us.

Tennant Risk Services is a wholesale broker and underwriting manager providing professional liability insurance.  We offer a broad portfolio of Cyber Risk Insurance, Technology E&O and other Professional Liability products customized to meet the specific needs of your clients.  We will provide you with the experience, expertise and market access that you need and expect so you can successfully meet your clients’ insurance needs.

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Tennant Risk Services
124 LaSalle Road
West Hartford, CT 06107
Phone: (860) 519-1301
Fax: (860) 216-5845

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