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cyber insurance explained

Cyber Insurance Explained: What it is and Why You Need It

Cyber Insurance provides cover for financial loss and expenses that businesses may suffer as a result of a Cyber Event, including cyber attacks from malware or other invasive software, cyber extortion and social engineering. Claims covered under a Cyber policy are very broad, but are typically three core things: Liability (privacy lawsuits and regulatory defence), Internal Financial Loss (extortion, notification expenses, data recovery, business interruption, crime/theft), and Emergency Incident Response (costs incurred from responding to a Cyber Event).

cyber insurance

A Cyber Event triggers a claim on a Cyber Insurance policy and can be caused by several different scenarios:

What are the Coverages Available?

Main Coverages that respond to a Cyber Event:

1. Privacy Breach Notification & Crisis Management Costs

When a cyber incident occurs, whether it is through some kind of invasive software (malware, ransomware), phishing or social engineering scheme, or other form of cyber attack, there is usually a privacy breach as a result – i.e. private or confidential information/data is exposed. This policy section provides cover for the costs associated with responding to a privacy breach, including:

Incident response costs and 24/7 emergency hotline – the people you call when a cyber incident has occurred;

Notifying third parties about the data breach, including mandatory notification (i.e. mandatory for companies with a turnover of $3M+) and voluntary notification to clients, service providers or otherwise;

Performing computer forensics to determine the existence, cause, and scope of a network compromise or data breach;

Public relations costs associated with mitigating any reputational harm; and

Providing credit or identity monitoring and identity protection for those individuals whose personal data was or may have been breached as a result of a network compromise or data breach.

2. Privacy & Security Liability

This section protects you from claims/lawsuits as a result of a privacy and security wrongful act, such as:

Loss, theft or failure to reasonably protect personal data or confidential business information;

Violation of privacy laws or data breach reporting requirements;

Failure to implement adequate privacy or network security practices;

Negligence resulting in a failure to prevent a network compromise that results in:

    • Damage or loss of use to a third-parties computer system or data; and
    • Transmission of malware or a denial of service attack to a third party;

Failure to comply with your privacy policy and/or privacy notice.

3. Cyber Extortion

Cyber extortion is defined as a threat against the insured computer system to provide ransom in order to prevent a Cyber Attack. Coverage for this can include: the payment of a ransom, negotiation & mediation costs, crisis management costs & costs to resolve a security threat, and investigation costs to determine the cause of the extortion threat.

4. Business Interruption – Loss of Profits & Operational Expenses

Coverage for loss of profits and additional operating expenses incurred because of a cyber event.

5. Data Recovery & System Damage

This section covers the costs and expenses for lost, damaged or destroyed IT systems, records, and data. This can include the retrieving, repairing, restoring or replacing of data or systems, including the removal of malware.

6. Regulatory Defence and Fines

This section provides cover for defence costs and regulatory fines that have resulted from a cyber incident, such as a privacy or security breach.

7. Media Liability

Coverage for the following incidents that occur from your information through traditional and digital media:

Libel, slander or any other defamation or harm to a third party;

Copyright infringement, intellectual property rights infringement, plagiarism or misappropriation of property rights;

Misstatement or misrepresentation under the terms of the Competition and Consumer Act;

Infliction of emotional distress or mental anguish; among others

Additional Coverage Sections and Policy Options:

1. Social Engineering & Funds Transfer

The fraudulent transfer or theft of funds caused by instructions made by a person purporting to be an authorized employee, outsourced provider or customer of yours. This coverage is typically sub-limited.

2. Contingent Business Interruption

Coverage for loss of profits and additional operating expenses incurred as a result of an interruption to a dependant business/supply chain partner, caused by a cyber event.

3. Payment Card Data Security Liability

Coverage for loss of profits and additional operating expenses incurred as a result of an interruption to a dependant business/supply chain partner, caused by a cyber event.

Have any questions?

Talk to one of our Cyber Experts today!

What are the Cyber specific Exclusions?

Electromagnetic Discharge

Power Failure or Core Internet Infrastructure Failure

Product IP & Patent Infringement

Unsolicited Communications and Data Collection

For more details on standard Cyber Insurance exclusions, see our recent article here.

** The above are general examples only; each insurance policy is different and standard exclusions may apply. Please read your PDS and contact your insurance advisor to review your specific policy. **

What are the Price Influencers?

Number of Records/Files stored on system

Internal Cyber Security & Risk Management Procedures

Payment Authorisation Procedures

Do you handle credit card payments?

IT Risk Management such as Antivirus and Firewall procedures

Business Continuity Back-up and Archiving

Annual turnover

Business activity & industry

Which countries/territories you operate in

Prior claims and circumstances

Number of staff

What are the quote requirements?

Please complete this Proposal Form and return to our brokers below to arrange a Cyber Insurance quote.

(Download Here)

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About KBI

We are a specialist insurance brokerage with an emphasis on adding value to our clients by helping them make an informed decision. Our approach combines that of an insurance broker and consultant, where we focus on providing expert advice to our clients while customising their insurance program and risk management solutions.

Since starting in 2013, KBI is constantly growing and becoming a leader in the Australian market. Our primary point of difference is that we don’t try to be all things to all people.  We work in niche areas, where we can tailor an offering, advice and broker support to meet the specific area’s needs.

tyler speers kbi
By Tyler Speers

Tyler Speers is an Account Manager at KBI with a focus on Cyber insurance.

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