IN the 1990s with the advent of the dot-com bubble, Cyber Liability Insurance gained popularity as a layer of protection for these new companies against unauthorized system access, computer viruses and data loss. At that time, cyber crime and data breaches were not too common compared to what is happening today.
In response to the demands of their clients, insurers had to cover unauthorized access, network security, data loss and virus-related claims. In addition, insurers updated policies to include cyber business interruption, extortion and network asset damage.
In a typical ransomware incident, the criminal hackers lock up a target’s network or hold its data until a ransom has been paid. The risk of ransomware is covered by insurers under their general policies. Just recently, a massive attack on a United States fuel pipe company disrupted the flow of oil products such that gasoline stations throughout the nation had to stop operations. The fuel pipe company had to pay a reported sum of $5 million to cyber attackers.
As technology and the Internet evolved, technology-related risks evolved as well. Today, Internet-based technology is involved in nearly every aspect of life, from healthcare to home security.
As the frequency and severity of claims is increasing, the cost of insurance is surging and insurers are decreasing their underwriting capacity. Furthermore, insurers are asking more questions to determine if clients’ security measures and control are adequate.
In this era of the pandemic when entire workforces migrated from working in an office, where cyber security was more controlled, to working from home, cyber criminals are taking advantage of new security and human vulnerabilities.
Privacy Liability coverage is also important for those companies with sensitive customer and employee information, which are exposed to breaches or violations that threaten the security of those compromised and even damage their reputation.
Cyber Insurance coverage cannot be ignored and may be purchased by companies to reduce the financial risks associated with doing business online. Cyber insurance is also available to individuals to cover loss related to cyber identity theft and damage to reputation, data recovery as well as devices damaged. Finally, the cost of cyber insurance depends on one’s risk factors and the adequacy of security measures in place.
The author is a risk management consultant and Editor of Insurance Philippines magazine.