The Growing Importance of Cyber Liability Coverage
We are seeing business interruption play a much larger role in cyber insurance and cyber coverage lately. Until just a few years ago, most of the focus for cyber insurance was on data breach or data privacy issues and the number of records leaked as a result of an incident. Now there’s much more focus on the actual financial disruptions that these cyber events are causing and the resulting business interruption that comes along with them.
In the past, organizations tended to focus on business interruption after an event. Now, more organizations are taking a proactive approach to managing their risks. They’re evaluating their potential business interruption exposure ahead of a loss by describing what a worst case loss scenario might be. That extends to cyber as well, walking through different scenarios of cyber events or cyber breaches that may disrupt the organization’s performance.
A cyber business interruption risk can be difficult to estimate and manage. Here are 5 areas where Cyber Business Interruption differs from Traditional Business Interruption:
- Period of Measurement. When evaluating lost business income, the period of measurement typically is much shorter for cyber related interruptions as opposed to traditional. Cyber incidents may last for just a few hours or a few days whereas property losses can take months or even years. You need much more granular levels of data when drilling down into cyber disruptions.
- Period of Restoration. This is defined as starting on the date of the loss and ending on the date when the repairs should have been completed. With property losses, such as when a fire occurs, it is much easier to determine these dates. However, with cyber, you aren't always sure when a breach occurred and when it ended.
- Personnel Involved. Typically, more personnel is needed when it comes to cyber business interruptions. There is usually a need for a risk manager, legal counsel, financial, operations and technology officers and others to contribute to the assessment.
- Geographic Constraints. Global organizations could all be impacted by a cyber breach at the same time. Whereas, property losses typically only occur on a single area or region. This can make cyber interruptions much more complex.
- Reputational Risk. If a company is hacked and customer records are stolen, the public can view the company as less trustworthy. A company's reputation is typically less at risk when it comes to a traditional property business interruption, such as a fire at a factory.
Talk to your clients about Cyber Liability. Find applications for quotes on our website here. You can also try our phone quoting option to get a quote in less than 5 minutes by calling (877) 969-7539. The CID team has also put together a recorded webinar that goes into detail on the importance of Cyber Liability and how you can communicate that to your clients. You will gain a stronger understanding of Cyber insurance and how breaches occur. We go over the anatomy of a claim and how to successfully sell to the client. Watch the webinar here.