For some it simply stirs up thoughts of one of Doctor Who’s oldest enemies but for those whose business makes use of the modern wonder that is the world wide web, cyber liability could prove to be a genuine business threat.
Incredible advances in technology have brought about great efficiencies and enhancements within business, not to mention exceptionally powerful marketing and transactional tools. But in the same way that the move from propellers to jet engines introduced new risks, advancements in technology bring their own exposures such as cyber-crime, identity theft, fraud, media liabilities (as a result of online publishing) and a financial reliance on networks being available.
3 key risks
Cyber Liability to Third Parties, an exposure faced by companies that provide content or information via a website. Exposed to many of the legal issues that apply to traditional publishers, such as copyright, defamation and infringement of intellectual property, companies can find their web content exposed to a far wider audience.
Network Security, a key concern for any business that holds customer data or other sensitive information within their networks. Legal obligations to protect and safeguard this information are well known and a breach of privacy or security can lead to costly fines and penalties imposed under data protection legislation, not to mention the likely impact of adverse publicity, lost reputation and customers.
Business Interruption & Loss of Data for those companies that have become heavily reliant on their e-commerce and business computer networks to trade.
Being without a computer system when reliant on online sales or computer based databases can create serious financial shortfalls.
“But surely my insurance covers it”
Well, probably not.
Traditional liability insurance products do not address internet exposures and in the absence of any physical damage, your loss of trading time and income certainly isn’t catered for. Consider these examples of losses suffered where traditional insurance falls short.
Kodak mispriced a digital camera online at £100 instead of £329, receiving more than 10,000 orders costing £2,300,000 rather than facing threatened legal action.
Norwich Union (now Aviva) who paid Western Provident £450,000 following an email that had incorrectly alleged that the DTI were about to investigate WP.
British Gas were forced to pay in excess of £200,000 to an ex-employee arising from comments circulated via the internet that breached his privacy.
So, what can be done?
There is no real substitute for sound risk assessment and management. As with all business risks, no matter how much an insurance policy caters for the costs involved, damaged reputations and lost customers are tough to recover from. But now insurance has become a viable option.
First established around the turn of the century through fear of the millennium bug, a Cyber Liability insurance market has developed that now recognises the variety of risks faced and has adapted policies accordingly. Cover can now be found for elements such as
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Technology errors and omission
- Multimedia liability catering for website content and activity
- Security and privacy liability
- Data recovery and income loss
- Privacy regulatory defence and penalties incurred
- Data extortion
But possibly the most valuable asset to be included is cover for crisis management costs, helping businesses to cope with the actions needed following the likes of a data breach.
Need to know more?
Give us a call free on 0800 668 1933
And ask for Glyn Maflin or
or email ask@belmontint.com.
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