Cyber insurance – are you covered?

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Tuesday November 20, 2012 at 9:00am
Whilst recently working in the City of London with a Lloyd’s Broker one of their senior Directors alerted me to a real risk that many business owners are probably not even aware of. This Director with over thirty years’ experience within the City, advised that many organisations were now operating potentially with little or no cover - in respect of their ‘e-commerce’ or similar online activities.

It was explained that standard insurance products are unlikely to pay out in situations like a major virus damaging IT systems, an attack on hardware, infringement of intellectual property rights, identity fraud, systems suspension enacted during any criminal investigations or perhaps the more common one, data loss.

If you examine most SME businesses today, some part of their operational processes will encompass data gathering about customers and prospects; ‘on-line’ trading; storage of customer preferences etc, all in an electronic format. Some of these organisations will have adopted sound security management Standards such as ISO27001 - to mitigate and reduce the loss of valuable corporate assets. But applying and obtaining the correct insurance, to cover ‘e-attacks’ or ‘cyber-crime’ has not been a common accompaniment to information security compliance in spite of the fact that there are high quality insurance providers offering good policies to cover many of these issues.

Business owners or directors might believe that such an additional premium is not worthwhile. But as my Lloyds Broker contact explained; the consequential losses of a major data loss, Intellectual Property Rights infringement, or major security breach – could be so severe that claims alone against the enterprise, could force it out of business.

Our advice is to undertake an audit or information security benchmark exercise, to understand the information security risks within your business. Having understood the risks it’s then so much easier to do a proper cost benefit analysis to decide whether the additional premium to cover cyber-risk is worth it.

Marcus Allen
Parker Management Consultants

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