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What is Cyber Insurance?

A cyber insurance policy is intended to help organizations mitigate risks associated with cyber-related security breaches. By offsetting the costs involved in recovery, a cyber insurance broker can help businesses find the right cyber insurance policy to protect their assets from cyber fraud or other issues that might contribute to cyber-related loss. 

Technology plays a huge role in the way companies run their businesses. An online presence including a website, social media, eCommerce, and data collection have vital roles in today’s successful operations. And because of this shift, since about 2005, businesses have started to take cybersecurity more seriously and have invested in solutions to protect their organizations in the event of a security breach. 

In particular, logistics service providers are at a heightened risk of being targeted by cybercriminals because their business is predominately handled electronically. And while individuals in the industry are getting more familiar with the risks, cybercrime is still a relatively new exposure within the industry. Small and medium-sized freight forwarders are particularly vulnerable as their cybersecurity measures aren’t always quite as secure. 

While the importance of cyber insurance is easy to explain, it might be challenging to understand exactly what it covers and how cyber insurance claims are handled. There is currently no standard for these types of insurance policies, but below are common expenses that are typically covered under cyber insurance offered through Roanoke Trade: 

  • Data Loss Coverage – Designed to cover the financial loss involved with recreating data that has been stolen, lost, or corrupted.
  • Notification Expenses – Designed to cover any expenses involved in notifying relevant parties of a security breach or loss of data. 
  • Regulatory Investigation Expenses – Designed to cover costs associated with regulatory agencies used to keep customer data secure (ex. TSA, CBP, and the Bureau of Industry Security). 
  • Public Relations – Designed to cover any expenses involved in damage control after a breach. 
  • Business Interruption – Designed to cover a loss to revenues due to an interruption to normal business operations caused by data breach, hacking, or fraud. 
  • Content Liability – Designed to cover intellectual property claims. 
  • Data Loss in Transit – Designed to cover logistics providers who are involved with the transport of computers or data storage devices. 

Historically, the insurance industry is hesitant to create new products for new exposures, yet cyber liability insurance has become a necessity and is now becoming more affordable to logistics companies. When taking into consideration that one shipment can pass through multiple computers, websites, servers, cloud services, and websites from a variety of third-party vendors, the risk of a cyberattack is very high for logistics companies. 

Why aren’t electronic data breaches covered under traditional business package policies? These types of insurance policies are intended to only cover tangible assets, much in the same way that errors and omissions coverage exclusively covers errors or mistakes that your company makes. 

A cyber insurance liability policy is the only way to effectively protect your business from potential losses due to cyber crime incidents. And based on the growth rate for these types of crimes targeting logistics service providers, it’s a matter of ‘when’ and not ‘if’ for most companies. 

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