Privacy and security risks are generally excluded from general business liability policies; however, risks involved in Internet business have blossomed with the Internet itself. Cyber liability policies are relatively new additions to the suite of business insurance products. Introduced within the last 10 years, cyber liability policies provide businesses protection to both first-party and third-party exposures arising from Internet communications, e-business, networks and informational assets. First-party exposures include a company’s liability for holding private customer information, such as, credit cards, Social Security numbers and medical history. Third-party risks extend to a company’s clients who enter their personal information on the company’s website.
To protect your business, it is extremely important to have a risk management plan in place to keep client records safe from inside and outside intrusions. Even with the most sophisticated data management plan in place, every business is a target. For this reason, cyber liability coverage can help guard a business from exposures that include security breaches, mistakes and unauthorized employee acts, virus attacks, hacking, identity theft or private information loss, and infringing or disparaging content.
As an example, medical records are quickly becoming one of the most popular targets for criminals, because there is a substantial profit that can be made on the black market, as well as the difficulty in prosecuting the perpetrators. Many privacy advocates believe that the quickness at which the government is pushing to digitize medical records could increase the risk of medical identity theft. One key study has shown that fraud resulting from electronic health care data exposure increased 112% from 2008 to 2009, indicating that cyber liability coverage is crucial. Cases involving medical record fraud are expected to rise at a record pace. Other risks for businesses include the introduction of a virus to a client’s system, inadvertent release of confidential information, theft of intellectual property and website design that does not function correctly.
Cyber liability policies are continuously evolving as the business world’s dependence on the Internet and information infrastructures increase. Generally, the policies cover a wide range of risk areas, because one e-mail virus can set off a chain reaction and disrupt business for several days. Not only do cyber liability policies cover the cost of compromised data, but they can also provide for the cost of data recovery after an information technology disaster. Additionally, these policies work in concert with other business insurance policies, in minimizing overall business risk.
Many small and mid-sized businesses are underinsured in this area, as many business owners are unaware of the risks involved. Policy costs are generally based on the revenue of the business and the extent of the businesses risk exposure. At Henssler Norton Insurance, LLC, we suggest having a risk assessment performed by a qualified insurance expert to identify any gaps in coverage your business may have.