The ability to communicate and interact instantaneously on a global scale enables businesses to reach their customers directly, which can be a valuable asset to them, reducing the expense of travel in order to conduct meetings and other types of business deals and transactions. Consumers are also increasingly sharing private data whether through credit card transactions, banking, hotel reservations, etc. Furthermore, social media is now playing a role in how some companies interact with customers, using Facebook, Twitter, and LinkedIn.
But with the benefits and opportunities that advanced technology has afforded us come significant risks including the potential for privacy issues and cyber attacks. As businesses and individuals become more digital in their communications and in data sharing, they need to be aware of the range of related liability exposures including privacy, security, intellectual property, data breaches, etc.
Companies responsible for losses stemming from cyber attacks
There is no doubt that companies today have a very real digital-threat exposure. In fact, news of major corporations being victims of cyber theft and security breaches that compromised everything from personal information to private and public businesses records make the headlines on a regular basis. Cyber thieves target these businesses for the purpose of profiting illegally by accessing funds and records.
When such a compromise happens companies are responsible to consumers to remedy a breach, and in the case of a public company, they have the fiduciary responsibility to shareholders to disclose the cyber incident. To protect against these exposures, Cyber Liability insurance is needed. Coverage is available in many different forms along with various enhancements, but basically it is designed to provide protection against:
Unauthorized access to company files and records
Attacks waged on a company’s firewall or network security
Destruction of data or corruption stemming from a virus
Threats of cyber extortion
Network business interruption; and
Loss of income resulting from cyber attacks
Government calls for increased legislation
Amid a rising number of high-profile data breaches, the U.S. government is stepping up its scrutiny of cyber security. This has led to increased calls for legislation and regulation, which also places the burden on companies to demonstrate that the information provided by customers and clients is properly safeguarded online.
Despite the fact that cyber risks and cyber security are widely acknowledged to be a serious threat, a majority of companies today still do not purchase cyber liability insurance.
However, research indicates that this is changing. Insurance has a key role to play as companies and individuals look to better manage and reduce their potential financial losses from social media and cyber risks in the future.