A security breach can be a frightening occurrence. Banks and other financial institutions are particularly attractive targets for cyber threats. Insurance for financial institutions, therefore, should include policies that protect against potential cyber risks. Whether the breach is intentional or unintentional, an invasion of privacy or due to a flaw in technology, it is important to have proper insurance to cover any damages that it causes.
Unintentional breaches are often the result of negligence. Failure to safeguard a customer’s financial records or accidentally emailing private information to the wrong customer can result in liability. Intentional breaches involve such acts as the hacking of an institution’s system in order to make a statement, steal money or cause some other type of harm to the institution or its customers. Mediated violations of copyright or infringement of a customer’s privacy can place the organization in a precarious legal bind. Insurance for financial institutions can also cover failure of the system’s firewall or a computer glitch that inadvertently makes private information public.
Cyber policies can be designed to cover both first-party loss, such as interruption of business or public relations, and third-party loss, such as the cost of trial and any subsequent payouts. Financial institutions must evaluate their needs when it comes to protection against cyber risks and purchase the appropriate policies that cover those needs.