Cybersecurity insurance is a new and emerging industry. It has its origins in errors and omissions (E&O) insurance, a separate form of insurance that protects against faults and defects in the services a company provides. E&O insurance is analogous to product liability policies for companies that sell physical or digital products. At Patrick J Woods Insurance Agency, it’s important to us that you and your business stay safe during these emerging times. Read on to learn more about what is Cyber Insurance, how does it work, and why do you need it.
What is Cyber Insurance?
Cybersecurity insurance, also called cyber liability insurance or cyber insurance, is a contract that an entity can purchase to help reduce the financial risks associated with doing business online.
While some cyber insurance policies contain specific provisions for E&O, most providers sell these as separate and distinct policies. E&O insurance does not cover the loss of third-party data, such as customer credit card numbers; customers needing such protection can purchase a cyber insurance policy that covers it.
How Does Cyber Insurance Work?
Cyber insurance policies help cover the financial losses that result from cyber events and incidents. In addition, cyber-risk coverage helps with the costs associated with remediation, including payment for the legal assistance, investigators, crisis communicators, and customer credits or refunds. Vinson & Elkins discusses Cyber Insurance 101 in this short video.
Why is Cyber Insurance Important?
The loss, compromise or theft of electronic data can have a negative impact on a business, including the loss of customers and revenue. Businesses may be liable for damages stemming from the theft of third-party data. Cyber liability coverage is important to protect businesses against the risk of cyber events, including those associated with terrorism. Cyber-risk coverage can assist in the timely remediation of cyberattacks and incidents.
According to Thirdway.org, “There are approximately 300,000 reported malicious cyber incidents per year. Attacks cost the U.S. economy anywhere from $57 billion to $109 billion annually and these costs are increasing.” Cyber risk is real and let’s face it: almost everyone uses some kind of cyber technology every day. In an era when email is used for everything, and transactions often occur online, the world of cyber presents a great opportunity for criminals.
According to the Insurance Information Institute, “Insurance experts now consider the risk of cyber liability losses to exceed the risk of fraud or theft. In this tumultuous environment, your business can take several steps to limit risks, including purchasing cyber liability insurance.”