What are the basics of a Cyber Insurance Policy?
This specialist form of policy provides coverage for internet based risks and data related exposures of a business.
It consists of third party and first party section where insurers follow a modular format, breadth of coverage varies from insurer to insurer. It is therefore important that you obtain the appropriate coverage once your cyber risks have been identified.
Cyber Insurance should not be considered in isolation and should form part of a businesses cyber risk management program.
The Basics of a Cyber Insurance Policy:-
1. Third Party Section
Network Security Liability
This provides coverage for a businesses liability to a third party as a result of the destruction of a third party’s electronic data. This also encompasses an inadvertent transmission of a computer virus to a third party.
Data Privacy Liability
This relates to liability to a third party which may cause unauthorized disclosure of personally identifiable information or corporate information.
Your liability arising from content on your website as a result of a defamatory comment, infringement of copyright or invasion of privacy.
2. First Party Section
Network Business Interruption
This represents coverage for the interruption or suspension of your computer systems as a result of a network security breach or network failure , the later of which may not be automatically included. Insurers will reimburse a businesses and any expenses incurred in order to mitigate this.
Data Asset Protection
This provides coverage arising out of the corruption or destruction of your computer systems. The loss covered is the replacement and restoration costs.
A threat to the computer network where a ransom has been demanded, this will include negotiation costs.
Costs associated with responding to a data breach including forensic costs, credit monitoring, call center costs and public relations costs.
In addition to the policy coverage , it is important that the insurer is able to provide “vendors” who will manage a data breach , this should include as a minimum a solicitors , a forensic investigation company and a crisis response team.
Possible extensions to a Cyber Insurance Policy:-
Certain extensions are available generally for an additional premium , such as coverage where network interruption that has been caused by an outsourced service provider or that outsourced service provider has suffered a system failure that impacts on a business.
Further extensions can include coverage where there has been a cloud service failure that affects a business and criminal reward fund that allows for a reward for information that leads to the successful conviction of a hacker.
The Policy Limit
The policy will be on an “aggregate” policy basis, i.e. the total number of claims made in any one policy year will not exceed the annual aggregate.
The Policy Excess
A self – insured excess will be imposed by insurers which is the first part of any claim that the policyholder will need to pay.
The business interruption module will also be subject to a separate excess which is normally an hourly figure. This section will be subject to an indemnity period , which is the period that the policy will provide coverage for this module.
Does a Professional Indemnity policy provide coverage for Cyber Liability?
Professional indemnity policies have developed in recent years to provide a broad basis of coverage know as “civil liability” It is generally accepted that this type of policy provides elements of coverage that would fall into the third party section of a cyber liability policy and are recognized as the following :-
- Breach of privacy of third parties personal data or confidential corporate information caused as a result of a compromise of a computer system.
- Defamatory comments placed on your website as a result of unauthorized access to your computer systems by a hacker.
- Inadvertent transmission of a computer virus, logic bomb, worm or Trojan horse by an employee that causes damage or loss to third parties computer systems.
Professional indemnity policies have insuring clauses that are tied back to claims being made arising out of the professional business of firm however cyber liability requires a wider policy trigger such as those losses caused as a result of an unauthorized access of a firm’s computer systems.
Cyber Liability Extensions
An number of professional indemnity insurers will provide various cyber insurance related extensions, such as hacker damage or cyber extortion, these are only normally for small sub-limits of the main policy. One point to bear in mind if cyber extensions are added to a professional indemnity policy which is on an aggregate policy basis, any claims made arising out of cyber claims will go towards the overall erosion of the overall aggregate policy limit.
Some exclusions to take into account that may impact on the extent of cyber coverage under a professional indemnity policy are the deliberate acts and terrorism exclusions.
Not a substitute
The coverage for cyber liability under a professional indemnity policy should not be construed as a substitute for a stand alone cyber insurance policy and it is important that you seek proper advice from an insurance broker as to whether you have a requirement to purchase a cyber insurance policy.