Date: February 2012
While legislation struggles to keep pace, insurance steps in to help
Business risk in cyberspace is getting expensive. Data security breaches and social media activities are two red-hot issues that expose businesses of every size to huge financial and reputational risk. With legislators on both sides of the Atlantic rushing through new laws to keep up with this new reality, media and technology firms turn to specialist insurance, which can move more swiftly to provide much-needed protection. La Playa’s Matthew Clark provides a checklist of essentials and case studies.
The business environment has changed – with online transactions growing, wider use of social media, a move towards virtual networks and cloud computing, greater use of remote access, wireless networks and outsourcing of critical services. While the efficiency benefits are huge, each step deeper into cyberspace involves significant and very real risk.
When things go wrong with data privacy, it can be expensive: the costs of breach detection, crisis management, notifying affected customers, hiring PR consultants to minimise reputational damage, legal and forensic investigation costs and lost business soon mount up.
*Research by Chubb Insurance
“Privacy is a red-hot issue right now, with high-profile breaches all over the press. No matter how great your systems, it’s critical to get the right insurance in place”, says Matthew Clark, Science & Technology Director at specialist broker La Playa. “And because the Internet and IT networks are increasingly international, businesses are often exposed to liability in foreign territories – so you need a policy that protects you wherever you’re sued”.
It’s crucial now that all media and technology businesses work with a specialist insurance broker who really understands the risks and pressures in the sector and can customise both the shape and size of their coverage to fit the individual business.
Checklist for protecting your business online: Cyber Insurance can help protect a business against a range of risks – make sure you consult a specialist broker to help you get the right levels of cover customised for your specific risks:
You may also need to arrange additional coverage for Fraudulent Acts (damages payable as the result of, for example, the fraudulent use of an electronic signature) and Data Extortion (protection against the threat of extortion – for public figures, for example) depending on your risk exposures in these areas.
Cyber Crime: an IT director who was dismissed by his employer took revenge by deleting valuable data. The ex-employee was jailed for the hack but the company incurred hefty recompilation costs.
Data Breach: a local government agency lost an unencrypted memory stick with details of young people’s health records as well as their ethnicity, prompting a costly investigation.
IP Dispute: an importer of computer chips that allowed people to play pirated video games infringed copyright and broke foreign laws forbidding the circumvention of copy-protection technology – resulting in a costly lawsuit.
Technology Failure: a bank’s mobile phone banking application contained a security flaw resulting in sensitive information being saved in a hidden file on users’ phones.
Retailer Neglect: an electronics retailer was hauled over the coals for allowing sensitive customer data to be dumped in a skip next to one of its stores.
Sue L, Life Sciences
Specialist & Independent
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Tech-based business is 24/7, global and borderless, exposing you to new risks and liabilities - often in unfamiliar places. As the law struggles to keep pace with technology, insurance can provide a real safety net if you fall foul of changing legislation.