Post written by: Darryl Chidsey
By now, most people in the insurance industry have heard of cyber liability. Cyber liability is the risk posed by conducting business via the Internet, other networks, or by using electronic storage technology.
What You Need to Know About Cyber Liability
Like most other evolving exposures that have been introduced in the past, the insurance industry is still trying to figure out how to address cyber liability.
Defining Cyber Liabilty Exposure
At present, knowing what cyber liability is supposed to look like, does not necessarily mean fully understanding the complete extent of the exposure. This is likely because most of the exposures that fall within the realm of cyber lability involve the use of a computer and, as we all know, the technological advancements surrounding computers change rapidly and continuously. As a result, so does cyber liability.
Standards for Coverage
Since this emerging issue is evolving on a daily basis, the industry is finding it difficult to establish standards for coverage.
Currently, most coverage forms being used in the marketplace are proprietary in nature. However, Insurance Services Office (ISO) recently introduced an endorsement called Information Security Protection, which may be the first step toward standardizing coverage within the industry. What bears watching is how quickly the industry follows suit by adopting this endorsement to provide coverage for its insureds.
Lack of Historical Data
Another issue: There is little data available since this is a relatively new exposure.
One of the struggles insurance companies face is establishing what premium to charge, since most rates are derived from past loss history. Because the issue is so new, there are very few losses, making it difficult to predict future loss trends.
Another area where companies are struggling is determining what limits of insurance they are comfortable providing. How much of the company’s reserves are they willing to risk?
By nature, the industry tends to be conservative, which means higher limits of insurance may be difficult to find and will likely be expensive.
What Does This Mean for Independent Agents?
Any risk you insure that involves the use of a computer requires some type of cyber liability insurance. The needs they have will depend on the individual risk.
First, identify what your insured needs, and what he or she is willing to pay for. Next, it is important to know which of your companies has the ability to provide these types of coverages, and the specific coverages they can provide.
You also need to be familiar with the language in each company’s form. Remember, they are not all the same. While this will require some extra effort, it’s effort that’s certainly needed. If you are not willing to put in the extra work, someone else will and that will probably put your accounts at risk. Do not let that happen to you.
Make sure you know what coverage is available to you and your clients from a cyber liability perspective.
Image credit: Flickr via marsmet501