The ongoing technological revolution is undeniable. What was science fiction a few years ago is now an everyday reality deployed across the business world to increase efficiency and uncover new opportunity. But, the same technologies that attract business with the promise of cost efficiencies, better margins and enhanced marketing techniques have created vast new spaces for both inadvertent mistake and criminal conduct.
While prevention is often the best cure, the daily headlines demonstrate that even the most technologically advanced companies fall prey to a myriad of technology accidents or crimes. The pervasive presence of technology, such as email, cloud-stored data and electronically transmitted payments, combined with the complexity of the systems providing these services and the rapid pace of those systems’ change, unite to create an environment where accidental or intentional harm will occur despite robust caution and defense. According to the Verizon 2012 Data Breach Investigations Report, there were more than 850 reported data loss events in 2011, affecting more than 170 million records. Moreover, many experts agree that the reported losses are only a small fraction of the actual number of data loss events; for every headline-making data breach, there are thousands of smaller data breaches that go unreported.
While descriptions vary, cyber insurance can fairly be described as covering several different risk categories.
- Data breach coverage offers protection against the expenses associated with responding to and mitigating a loss of third-party data (often consumers’ or employees’ private data), and may include coverage for expenses such as notification, credit monitoring, forensic investigation and legal advice.
- Regulatory action coverage may assist with costs incurred in responding to and defending against regulatory claims; some policies may pay for part of any civil penalties assessed.
- Outage coverage can reimburse for business interruption losses relating to system or website downtime.
- Data loss coverage assists with the cost of replacing the insured’s lost data.
- Liability coverages may also be available, including content coverage, for claims relating to information posted on a company’s website (including, potentially, copyright materials), and virus coverage for claims that the insured’s systems transmitted a virus.
Other coverages may also be available for particular risks.