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Cyber Insurance

Cyber Insurance

If your business handles sensitive customer data (such as credit card or bank account numbers), data breaches pose a serious threat to your financial stability.

Cyber Insurance protects business against the expenses associated with a data breach, which can run into the hundreds of thousands of dollars.

A lawsuit resulting from a data breach means your business is responsible for paying legal fees, court-ordered judgements or settlements, and other court-related costs. In addition, your business will likely have to notify your customers of the breach, provide them with credit monitoring services, and invest in public relations efforts to repair your business’s image. In the absence of Cyber Insurance, these costs can quickly drain financial reserves.

When you do carry Cyber Liability Insurance, it protects your business assets by paying for a legal defence, court-ordered compensation, and other related expenses. In other words, cyber liability coverage allows you to focus on rebuilding and restoring your customers’ faith without worrying about the data breach-related expenses

Cyber Insurance Coverage Explained

For many startups and small businesses, Cyber Insurance is available both as a stand-alone policy and as an add-on to a Business Pack Policy.

The two major types of Cyber Liability Insurance are first-party coverage and third-party defense and liability coverage.

First-party coverage offers financial compensation to help you address immediate customer and business needs, such as those that result when your in-house IT network goes down.

Third-party coverage protects you in the event of a lawsuit brought by a customer or partner for a data breach that your business’s actions or negligence allowed. Depending on your business’s specific needs, you may choose either or both types of coverage.

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Key Details About Cyber Insurance

The type of data breach insurance you need depends on the specific kinds of work your business does. Below are key concepts to keep in mind when considering which type of Cyber Liability Insurance to buy.

First-party response may cover…

  • Legal and forensic services to determine whether a breach occurred and assist with regulatory compliance if a breach is verified.
  • Notification of affected customers and employees, including costs such as letter preparation and mailing.
  • Customer credit monitoring, as well as monitoring of fraud, public records, and other information as needed.
  • Crisis management and public relations to educate your customers about the breach and rebuild your company’s reputation.
  • Good faith advertising.
  • Business interruption expenses such as costs for additional staff, rented or leased equipment, use of third-party services, and additional labour arising from a covered claim.
  • Cyber extortion reimbursement for perils including credible threats to introduce malicious code; pharm and phish customer systems; or corrupt, damage, or destroy your computer system.

Third-party defence and liability may cover:

  • Judgements, civil awards, or settlements you’re legally obligated to pay after a data breach.
  • Electronic media liability, including infringement of copyright, domain name, trade name, service mark, or slogan on an intranet or Internet site.
  • Potential coverage for employee privacy liability as well as network security and privacy liability.

The Risks of Data Breaches Are Real

Many small business owners may not think they need this type of insurance, but startups and small businesses are actually the most vulnerable to security threats. Thousands of small businesses handle sensitive customer credit or bank account information daily, and many are also responsible for protecting customers’ medical information,  driver’s license numbers, and other sensitive financial data.

All it takes is one careless mistake by an employee, unauthorised access by a former employee or vendor, unshredded documents, skilled hacker, or stolen laptop, and your company could suddenly face a legal and financial challenge. Combined with strong security measures, cyber liability coverage is a cost-effective way to mitigate that risk.

Protect Your Business with a Rapid Response

If your customers’ sensitive information is compromised, there’s a good chance they’ll opt out of doing business with you in the future. Similarly, potential customers who hear about the security breach will be less likely to work with your firm. You can minimise the negative impact the data security breach has on your business by acting quickly. Swift, decisive action helps restore customer confidence and protect your bottom line.

Cyber Insurance allows you to focus on damage control and customer relations instead of worrying about how much damage your legal defence will have on your bank account.

 

Business Protection Tips

Implementing the following risk-management strategies will reduce the likelihood that your business experiences a data breach, and may even reduce your Cyber Liability Insurance premiums.

  • Keep sensitive information on a “need to know” basis.

Use passwords or physical locks to keep sensitive electronic data and physical files accessible only to those who need it to do their jobs.

  • Deploy encryptions, network security and firewalls.

If you have remote employees, limit the use of portable technology and provide a virtual private network connection for access to company computers.

  • Train employees on proper care and control of customer data.

Ensure employees understand the sensitivity and liability related to customers’ financial and personally identifiable information. Document processes and conduct regular training sessions as well as security audits to ensure compliance.

How Statewide can Help

  • Fast, Efficient Coverage.
  • More Choices. All Cyber Insurers sourced, multiple quotes.
  • Expert Insurance Brokers. Work with a broker who is familiar with your industry and can explain to you which types of coverage you need.
  • Customised Insurance Products. Find an insurance policy that’s tailored to your needs, so you never pay for coverage you don’t need.
  • Cyber Cover Website.  CyberCover will be launching in the first quarter of 2016, a dedicated online Cyber Liability placement website, developed exclusively by Statewide Insurance Brokers.
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WA Bushfires – QBE News Alert

The current Western Australia fires have brought significant damage across the state and has been declared as an industry catastrophe, we have people dedicated to these events in our call centres and managing c.change. We have initiated our Catastrophe Management Plan, and mobilising our assessor to ensure we can support you and your customers as quickly as possible should any damage occur. We would like to take this opportunity to ensure you have all the information you may require about our claims process, procedures and contacts.

Area Action
Motor and property claims contact Please lodge motor and property claims immediately via:

1.     Claims lodgement through c.change using Cat 695

2.     An email to giclaims@qbe.com with the following details: Cat 695 policy number, customer name, address, contact phone number, damage description, property or vehicle information

3.     Calling 1800 023 387

4.     Claims Relationship Manager (CRM).

Please send all claims correspondence, including new claims to giclaims@qbe.com Claim forms are NOT required. For claims in excess of Straight Through Process (STP) limits please contact your CRM to obtain immediate approval or assessment referral of these claims on your behalf.

Domestic & Commercial Glass For any home or commercial property glass claims, you or your clients can contact Express Glass and will only need to provide a QBE policy number to initiate a claim.   Express can be selected from the drop down menu when lodging in c.change.   Express Glass Phone: 1300 666 234
QBE Panel Builders & Repairs The builders listed below can be contacted directly for emergency repairs. Barclays Building Service Phone: 08 9406 4800 enquiries@bbsaustralia.com.au Midcity Phone: 0420 974 357 mark.gardiner@midcitygroup.com.au   Construct Services Phone: 1300 266 787 construct@constructservices.com
Assessors We have dedicated property and motor assessors ready to assist and adjust claims as access to the affected areas becomes available.   For priority allocation, when lodging a claim in c.change, please select the Internal Loss Adjuster or Internal Motor Assessor option.   Our adjusting and assessing staff will be in contact within 24 hours of appointment.
Emergency Assistance Payments Immediate assistance can be provided to customers by Electronic Funds Transfer into customer bank accounts based on the relevant policy terms.
Temporary Accommodation Emergency temporary accommodation can be arranged through QBE’s claims team or the appointed loss adjuster.
Food spoilage Food spoilage claims can be lodged and managed in c.change.   As customers safely dispose of spoiled food they should keep an inventory and price list and submit that for settlement.

 

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Emerging Insurance Risks Landscape

Underwriting Emerging Insurance Risks offers insurers avenues for innovation.

Insurers opting to take up these opportunities need to ensure policy wordings are sufficiently dear to avoid having to pay out on risks they never intended to cover.

That warning comes from Trevor Maynard, head of exposure management and reinsurance at Lloyd’s of London.   “The key thing is contract certainty” he says.  “If you didn’t expect your policy to be triggered by certain events, you need to be clearer on your wording.”

London-based Maynard visited the Gold Coast last year to speak about emerging risks at the biennial Hazards Conference.  While in Australia, he spoke about some of the research in which Lloyd’s has been engaged in 2015 in its efforts to better understand the global emerging risks landscape.

Lets take a look at some 2016 and beyond Emerging Insurance Risks

Food System Shock

Earlier this year, Lloyd’s released “Food system shock – The insurance impacts of acute disruption to global food supply.”   The report highlighted the extent of the global food system’s vulnerability to sudden shocks, and the widespread repercussions such events could have for communities, businesses and governments around the world.

“Our food shock report suggests a major El Nino lending to multiple global effects,” Maynard explains.  He says weather catastrophes and plant pandemics, caused by both El Nino and climate change, could lead to reductions in yields of maize, soy, wheat and rice.

The report suggests that in the event of such a catastrophe, the prices of those commodities could climb four to five times higher than pre­ event prices.

“Because the food system is quite fragile at the moment, the reserves are not very large, and because of population growth and changes in consumption patterns, people are demanding more and more from the food system,” he says. He adds that poorer countries may not be able to afford the predicted inflated prices of those commodities. “That can lead to political tensions, maybe terrorism, violence, war, instability in the banking system in those countries.

He estimates European stock markets could fall by about 10% and the US by 5%.  “This affects insurers’ balance sheets from both sides. The asset side of the balance sheet …could well fall in value, but equally, on the liability side of the balance sheet, we think that po1itical risk, business interruption, marine and aviation, agriculture, product 1iability and recall, and environmental liability …policies could end up with claims against them.”

So what can the industry do to better prepare to address food system risks?

“The more we can help government policymakers take that risk seriously, the better protected society will be,” Maynard advises. “Ultimately, the insurance industry will benefit as well, because those unexpected claims are less likely to arise.”

Solar Risk

Lloyd’s also released research this year on risks posed by solar storms. The report details how large geomagnetic storms, while rare,, can create massive current surges, which can overload electric grid systems and damage critical transformers. “We have to be capitalised to withstand this, “Maynard says.

He mentions the Carrington Event, one of the largest recorded geomagnetic storms, which occurred in September 1959.  “It’s estimated that if a solar storm of similar scale occurred today, between 20 and 40 million people in the US would be affected.  The power outage could last from 16 days to one to two years” he says.   And while he admits the one- to two year figure is ‘clearly an Armageddon-type scenario’ it cannot be ruled out.

“It could take quite a long time to rebuild the infrastructure.  The economic cost is estimated at  between  US$0.6  and  $2.6trn [A$3.67trn], with only a portion of that cost insured under business interruption or property damage policies.  But my feeling is that, for an event of that magnitude, there is a risk that lawyers could be very creative in interpreting policy terms and conditions, and the implications on the cost to the public could be significant.”

The report concludes that, given the potential costs and consequences of a major power outage, the power industry policymakers and insurers need to evaluate their preparatory and mitigation measures.

Cyber Risk

Maynard also mentions the emerging cyber risk. He describes cyber as a rapidly growing market that’s still relatively small.

In July, Lloyd’s and the University of Cambridge’s Centre for Risk Studies launched Business Blackout, a joint report that becmne the first to analyse the insurance implications of a major cyberattack, again using the US power grid for its scenario.

That scenario involved hackers shutting down parts of the US power grid, affecting 15 states and Washington, DC and leaving 93 million people without power.   The total estimated impact of the scenario was US$243bn (A$342.96bn), rising to over $1tm in the most extreme version. Discussing the logistics ofthe attack, Maynard says:  “The gas turbines that make electricity have lots of safety technology built in to protect the grid, but the ability to access these systems remotely means there is a potentiaI that the very systems that protect the grid could be hacked into.

“A simulated attack to test the system has been done, so they know they can do it, and are working to build resiliency.

“Clearly, I ought to stress that there’s an industry on the other side of this trying to make sure this doesn’t happen.  So it’s not a certainty, but the point is it can’t be ruled out, and the cyber experts that we’ve worked with suggest that it’s doable.”

Elsewhere on the cyber front, Maynard expresses concern about insurance policies unintentionally providing clients with cyber coverage. “We can see many lines of business that could be incidentally covering cyber perhaps through being silent on wordings or not being clear.” Again, he stresses the importance of insurance companies adopting dear and careful wording in their policies to ensure they provide only the coverage originally anticipated.

At Home

How well does our local general insurance market fit when it comes to responding to new and emerging risks?

Chris Mackinnon, Lloyd’s general representative in Australia. tells Insurance Business: “Historically the general insurance industry in Australia has responded to emerging risks by adapting and launching products locally that already exist in overseas markets. In particular, the Australian-based US insurers have tended to react to local demand by adapting their overseas product such as directors and officers liability, to suit the Australian market, and these products were often then replicated, and sometimes enhanced, by the local domestic insurance market.”

“However, in recent times we have seen a significant increase in the speed of new risk emergence, with issues such as cyber liability, autonomous vehicles, the sharing economy and drones all gaining prominence …The speed with which insurers react to these emerging risks is now becoming more critical in order to meet the immediacy of demand, and some of the Australian general insurance industry seem to now be focusing their thinking on proactive new product development.”

Report reproduced from InsuranceBusinessOnline