It seems that everyone, from President Obama to Facebook account holders, is concerned about cybersecurity. Data breaches and cyberintrusions are front-page news, businesses are warned to take a "when, not if" approach to these threats. In light of this reality, businesses are treating data security as one of their most important risks, and a growing number of insurance companies are offering policies to help them prevent and respond to data breaches and attacks. Cyberinsurance policies generally provide both first-party and third-party coverage. First-party protections include the costs of a forensic investigation to uncover and remediate the breach, retention of privacy lawyers to ensure compliance with relevant laws and regulations, public relations experts to mitigate reputation damage, and companies to notify affected parties of the breach and to conduct credit monitoring, if required. Third-party coverage includes the defense of lawsuits and payment of damages, and coverage for regulatory actions in connection with a security failure, privacy breach, or the failure to disclose a security failure or privacy breach.
While cyberinsurance is not a replacement for diligent in-house data security policies and procedures, prudent businesses should seriously consider it as part of their risk management program. In fact, even the process of applying for cyberinsurance can serve as a useful road map for a business to improve its data security processes.
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