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Cyber liability is evolving because electronic communication is evolving. In 2005 the Insurance Services Office (ISO) developed a standardized coverage form called the E-Commerce Program, and it has already been updated twice since it was introduced. Many carriers that write this coverage developed their own coverage forms so they could quickly modify the coverage as exposures change.
Our experts state that most carriers provide cyber liability coverage on a nonadmitted basis. This allows for the quick innovations and significant pricing flexibility required in such a rapidly changing marketplace.
Carriers that write this coverage include Philadelphia Insurance Companies, Travelers, Hiscox, Markel, CFC, Beazley, Chartis, Lloyd’s of London, Axis, OneBeacon, XL Insurance, Chubb, CNA, Great American, Crum & Forster, Hudson Specialty, Hartford, and Specialty Global.
Who needs this coverage? According to Matt Prevost, product manager: cyber and professional liability at Philadelphia Insurance Companies, “Any business that uses the Internet or operates an intranet needs some form of cyber or privacy coverage.” David Derigiotis, director of professional lines at Burns & Wilcox, adds, “Any business that has customers and maintains files or a database that contains sensitive information has an exposure. Sensitive information can be as simple as an email address, home address, first and last names and, of course, Social Security numbers and credit card information.”
Steven Haase, CPCU, ARM, president of INSUREtrust.com LLC, says, “At a minimum, all companies have an exposure to theft of employee information, website content, rogue employee issues, phishing attacks, domain name disputes, etc.” Tim Francis, business insurance management and professional liability and cyber insurance lead at Travelers, states it quite simply: “Any business, as well as any nonprofit organization, that uses technology is exposed to cyber risks.”
The coverage forms and policies available to cover cyber risks are moving beyond security-only issues. Carriers are introducing package policies that include both first- and third-party coverages. Mr. Haase lists eight key elements of cyber liability coverage:
- Security and privacy liability
- Website content coverage/intellectual property and domain name coverage
- Virus coverage
- Civil regulatory actions
- First-party coverage for breach notifications, forensics, and credit monitoring expenses
- Cyber extortion
- Loss of data
- Loss of income due to loss of network resources
Jason Glasgow, CyberRisk product manager for Travelers Bond and Financial Products, provides a similar listing but breaks the grouping into first- and third-party coverages.
First-party coverage:
- Crisis management event expenses
- Security breach remediation and notification expenses
- Computer program and electronic data restoration expenses
- Computer fraud
- Funds transfer fraud
- E-commerce extortion
- Business interruption and additional expenses
Third-party liability coverage:
- Network and information security liability
- Communications and media liability
- Regulatory defense expenses
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