Cyber Liability Insurance – An Emerging Risk

Take note of these words – Cyber Liability. These two words breed fear in the eyes of insurers, brokers and clients who understand it.

Cyber Liability Insurance has been designed to provide protection against customer information that is breached or stolen. Companies that store private and confidential information about their customers have a duty of care to keep this information safe and secure. The last thing a business wants is for this information to fall into the hands of a third party. Just ask Sony.

Secondly, Cyber Liability Insurance can provide protection against inadvertent breach of copyright or defamation on the internet. In the days of blogs, Facebook, Twitter etc, don’t all online businesses have some sort of Cyber exposure?

Cyber Liability is currently an emerging market in Australia. The only real players today are Zurich and Chubb, however both policies can be seen as expensive when compared to the rest of a businesses insurance program. It has been said that premiums are still a couple of years away from being at a level that is affordable to the average Australian small business.

One of the most misunderstood concepts currently in the market is that an existing business pack policy will provide cover for theft of a customer’s electronic information. When reading through the fine print of a policy wording, the following exclusion can be found.

These Policy sections do not insure:

(a) total or partial destruction, distortion, erasure, corruption, alteration, misinterpretation or misappropriation of Electronic Data;
(b) error in creating, amending, entering, deleting or using Electronic Data; or
(c) total or partial inability or failure to receive, send, access or use Electronic Data for any time or at all,

from any cause whatsoever, regardless of any other contributing cause or event whenever it may occur.

Disclaimer: All policies are different – The above is an example from an existing business pack and other policies can vary. Please read your PDS carefully.

I was recently interviewed for an article about the importance of Cyber Liability Insurance for the Sydney Morning Herald, where we discussed an example of an IT company who required the cover but it was not an affordable option for them.

Until the insurance companies catch up to the increasingly complex insurance requirements in the online environment, the high cost of Cyber Liability Insurance makes it unobtainable to most small businesses in Australia.