Do we really need a Cyber Liability Cover?

The Need of Cyber Liability Insurance Policy

In the era of technology, many firms record their financial transactions; store their tax records, sales projection and other important information on digital platforms. The damage of this electronic information can be very costly for a firm. If the sensitive data or any personal information of the employees or customer get lost or tampered due to the hacker, then the company can get sued by the data principles. The states have established laws for the companies to take measures when the data has been breached by them. One can protect the business against the expenses incurred during the data breaches by purchasing the cyber liability insurance policy.

 What is Cyber Liability Insurance Policy?

The cyber liability insurance policy includes the financial losses that arise from the data breaches and other cyber events leading to a data breach. These policies generally comprise both first-party and third-party coverage. In first-party coverage, the insurance companies pay directly to the firm the expenses resulted from the data breach, for instance- expenses incurred for informing the customers or clients about the hacker’s attack. According to the third party coverage, the insurance companies pay for claims against the companies by the people who have been insured by the companies’ actions. The elements of a good cyber liability insurance policy primarily include the following: the first-party liability coverage and the third party liability coverage.  

 Who needs the Cyber Liability Insurance Policy?

The giant corporate houses at times have incurred a humongous amount of losses due to the data breach incident. Equifax incurred the mammoth loss of $140 million due to the data breach. As per the estimates of PwC , the cyber incidents cost the companies across the world a huge loss of $400 billion annually. Therefore, cyber liability insurance becomes an important thing for companies facing the imminent danger of cyber thefts or attacks.

 The first party coverage policy

The first party coverage policy covers the amount incurrent to replace the damaged or stolen electronic data due to the cyber attack. It may also include the fees of hiring experts or consultants who can help to restore or preserve the electronic data. The policy also insures the amount of loss you can suffer if you happen to close down the business on the failure of your computer system or any data breach. It covers the extra income or income losses arising from the shutdown of the business. The policy also protects the company from the hacker eventually by paying off the extortion payment the company make to the hacker. The cost of providing the notifications to the party affected by the data breach also comes under the ambit of first-party coverage of cyber liability insurance policy. There is a special provision of crisis management in the cyber insurance liability policy which includes the cost the company has to incur on marketing and maintaining the reputation tainted due to the data breach. The first party liability coverage thus includes the breach announcements, credit monitoring and public relations.

 The third-party liability coverage

The third-party liability coverage includes the damages or settlements that arise from the covered claims. The importance of third party insurance has arisen in recent years as it compensates the client for the breach of data due to the cyber thefts or attacks. It insures the company against the claim of negligent acts or omissions that result into any malware attack or the data breach or any significant security breach of the computer system. It also covers the claims that arise out of the allegation that the company has failed to protect the sensitive information of the clients or customers or its own employees or any other entity. The distinct feature of third party liability coverage is the inclusion of the electronic media liability wherein the insurance company pays off the lawsuits that arise out of the acts like defamation, libel or slander. This policy also includes the fines or penalties that the company has to pay when it violates any regulation related to data privacy or security.