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Cyber Liability – Part One in a series

By Tim Kolacz

Cyber Liability is all the rage right now. And it should be. Cloud storage, personal storage, firewalls and 256-bit encryption are all terms that you, not just the CIO, should be familiar with. Most importantly, because you probably are the CIO and don’t even know it! There are several things that are, or can be covered, in a Cyber coverage, so let’s dive in.

Cyber Liability is designed to provide protection against exposures related to the use of the Internet. This includes the Internet of Things, social media, email and any other form of digital storage. Items in the Internet of Things are your cell phone, your computer, a refrigerator, your lighting and your thermostat. There is also an item called the Internet of Threats. New one to you, right? Well this one is all of the bad stuff that can attack you and your company. This is the Malware, viruses and the attacks against your website that can cause it to go down, forcing a loss of revenue, either immediately or in the long term due to bad press.

When you store documents digitally, they are saved into a server. That server maybe in your office, it may be at your outsourced IT company, and be on their server or it may be in both; you save it locally and then is backed up remotely. Now you should have some firewalls in place so that the majority of attacks to your business are blocked. The good stuff comes in and the bad stuff is stopped at the door.

If they do get through the front door, you can have your information encrypted. Encryption has been around for a very long time. When you encrypt your information, you are putting extra security onto your information and only a person with the passcode can decipher it. Kind of like when you got the decoder ring from Cracker Jacks and your buddies sent notes to each other so that no one knew what you were talking about. Encryption is the same thing, just on a much higher level. (and the notes were always about the cute girl in the third row)

So, suppose they get in and then they crack your code and all your information is exposed; now what? Well, it depends on what the bad guys want to do with it. A lot of time lately, the bad guys will send you a note and hold your information for ransom. They have now kidnapped your info. They may demand money in exchange for giving you the new code to retrieve your information. They never really stole it, they just changed the encryption so you couldn’t access the data.

Sometimes they will steal it and then try to sell in on the black market, the dark web. This is like an international bazaar where credit card numbers and the like are sold at auction. They will sell blocks of them at a time, knowing that all won’t work. So what is covered?

When information is stolen, the insurance carrier can provide coverage for the notification of the effected people and then to also monitor your credit history to pick up when there is activity on your Social Security number. Then they notify you and you can help thwart further actions by telling the credit card people that the info has been stolen. Most credit card companies have whole divisions set up to help combat additional harm coming to you after a theft of information.

You can also protect your brand as well, as it relates to a cyber-crime. A coverage called BrandGuard from NAS provides coverage for reputational harm due to attacks from a cyber breach. Business Interruption coverage can also be part of your program. So when you have a loss of income due to an attack, those lost monies can also have coverage.

Moreover, your paper files are also covered. So when you have boxes of personnel files in a storage unit away from the office and those are broken into, that has coverage as well. Even if they are on route to the storage unit, and a box was left on top of the car and all of the papers fly away, you have coverage.

Cyber breaches are increasing every year. Breaches were up about 20% just from 2014 to 2015. More are also on their way. With the ease of people able to access a computer and the amount of money being involved at an all-time high, it is easy to see why so many attacks occur on a daily basis.

The best way to prevent a breach is to prepare ahead of time with high quality firewalls and additional protections from your IT group or IT provider. However, you should have a Cyber Liability policy to help move some of that risk to others. They have never been more cost effective nor has more coverage ever been provided. Good coverage and affordable pricing make for looking like a hero when something goes awry.

In my next article, I will go into more specifics on each of the coverage parts of a Cyber Liability coverage, including First Party coverages, Network Security Liability and Privacy Liability.

Tim Kolacz works for HUB International, a national brokerage focusing on client services and making sure you stay in business. He can be reached at 951-779-8730 or at [email protected]. Tim will also be hosting a Cyber Liability webinar at the end of March.

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