Innovation in insurance is exploding. Like us, other insurtech startups are developing technologies to bring modern business efficiencies to the insurance industry. One area in the insurtech space that is seeing more new companies than others is around Cyber Liability Insurance.
Cyber threats are growing at a fast clip. Investors are interested in funding companies working to combat data security and privacy. It makes sense that Cyber Liability Insurance startups are at the heart of insurtech growth. While founding teams often have robust knowledge and deep experience in enterprise data security, they have limited experience with insurance. Commercial insurance is nuanced and can be complex. Experience in the commercial insurance industry, particularly in the realm of technology and cyber insurance, is crucial to offering customers a complete Cyber Liability Insurance solution. Cyber Liability Insurance is one key component of a solid cybersecurity strategy. Read on for three things to consider when shopping for cyber liability insurance.
Cyber Attacks Against Small Businesses
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Standalone Cyber Liability Insurance does not address every cyber exposure that your company faces. As a general rule, a standalone Cyber Liability policy only covers third-party damages or damages caused to people or companies who are not the policyholder. Standalone policies cover things like the costs to defend and settle a lawsuit brought against your company as a result of your company’s systems getting hacked and customer information being leaked or stolen.
First-party damages, or damages directly to the policyholder, are usually not covered automatically and need to be added to your Cyber Liability policy. Things like lost revenue, reputation damage, and regulatory fines are not covered by a Cyber Liability policy that only includes coverage for third-party damages. This could potentially leave your company (the policyholder) exposed to tens to hundreds of thousands of dollars in uncovered costs.
Understanding the differences between cybersecurity and cyber liability insurance will help you ensure your company has comprehensive protection. In order to protect your company and have insurance in place to cover the expenses associated with a cyber breach, you should bundle a cyber liability policy with other types of coverage like crime policies and property policies.
If you’re shopping for cyber liability insurance, and get an “almost too good to be true” quote from a company that sells only cyber liability insurance, do some research and check to see if third- and first-party damages are included and if the cyber policy is or can be bundled with other policies like those mentioned above.
Inherently, insurance brokers and agents face a certain amount of exposure. What does this mean? If a policy they sell doesn’t respond to a claim, a company might blame the broker and try to recover damages from the broker.
If a company is selling only cyber liability insurance, they are likely not advising companies that comprehensive cyber coverage includes a cyber policy that covers third- and first-party damages as well as other policies like crime and property policies. Many of the standalone policies offered by cyber insurance only companies are specifically designed to cover limited third-party damages. There is a higher likelihood that claims from companies who experience a cyber breach will be denied. It isn’t unreasonable that a denied claim may lead to a company trying to recover damages from the cyber liability only company.
It’s a no win situation. Your company has a claim denied, and you’re out of pocket for serious expenses. You can’t recover expenses from the company who sold you the cyber policy. When shopping and comparing cyber liability insurance policy quotes, check for third- and first-party damages and additional policy offerings to protect your company and limit exposure.
Many cyber insurance startups offer risk assessments or cybersecurity plans along with the insurance policy they sell. This doesn’t directly decrease the price of the insurance policy or save your company any money.
Saving money on a cyber liability insurance policy are slim. Most insurance carriers expect and assume that your company already has cybersecurity measures in place. If you don’t, and put them in place as a result of risk assessment, the reward is that your company is more protected than before. Don’t fall for the common misconception that completing a risk assessment of putting a cybersecurity plan in place will save you money on your cyber liability insurance premiums.
One size never fits all with business insurance. This is especially true for cyber insurance. As a business owner, it is important that you are careful when shopping and selecting a partner for your cyber liability insurance. Avoid the pitfalls we outlined in this post to ensure your company has comprehensive protection that will respond to as many threats your company faces as possible.
At Layr, we’re building #BetterBusinessInsurance. For us, that means ensuring our customers get sound advice that is easy to understand and providing well-rounded protection through insurance like our flat rate cyber liability policy that includes protection for both third-party damages as well as many of the most common first-party damages. If you’re interested in learning more about cyber liability and data breach insurance including what it does and doesn’t cover, download our free cyber liability insurance e-book. It includes information that will help you make a better and more informed cyber insurance purchases. If you have already purchased a standalone cyber policy and would like to make sure your company is adequately covered, contact us and we will perform a complimentary review and share the results.