Cyberinsurance: Is Your Data Insured?

The September 2005 issue of Law Practice contains an interesting article - Cyberinsurance: It's Like Singing in the Rain. The piece points out that there are 4 ways to deal with risk: you can accept it, reduce it, ignore it or transfer it. Cyberinsurance allows a firm to transfer the risk associated with the loss of a firm's data from the firm to the insurance provider. Note: Your typical business insurance does not provide this type of coverage. According to the authors there are 6 types of coverage available: 1) first-party business interruption; 2) first-party electronic data damage; 3) first-party extortion; 4) third-party network security liability, 5) third-party (downstream) network liability; 6) and third-party media liability. Familiar insurance providers that offer the coverage are St. Paul Companies, Zurich Northern America, Chubb, CAN and Media-pro. It sounds like the application for this type of coverage is as burdensome to complete as one is for E&O coverage. Small firms who may not have adequate security systems to be eligible for coverage may want to perform their own security assessment or outsource the assessment to companies that provide those services so that they are "insurable".