A New Product for Cyber Liability Coverage
We recently sat down with Distinguished Specialty’s Chief Operating Officer, James Flynn, to talk about a brand new insurance product on the Distinguished Speciality menu: Cyber Liability. For those keeping up with the news, you’ve read the headlines: data breaches, network hacks, business interruption by criminals seeking proprietary or confidential information. The risk of a cyber attack is real and should be considered a threat to any business housing data.
Q: Tell us about Distinguished Specialty’s new cybersecurity insurance product? What led the team to build this product and how did they go about doing it?
A: Distinguished Specialty has a core expertise in the hospitality and real estate industries. We constantly rely on this expertise to assess whether we can develop new products that will add value to the market place. With the recent drastic increase in cyber crime in the hospitality community, we felt compelled to create a Cyber Liability product that was tailored to meet their specific needs. In order to accomplish this, Distinguished Specialty partnered with Beazley, a Lloyd’s syndicate and expert in Cyber Liability. Beazley has committed to developing cutting edge Cyber Liability products across several industries. Distinguished Specialty realized that by combining our hospitality expertise with Beazely’s commitment to Cyber Liability excellence, we could deliver a product that would compliment our existing suite of hospitality products. We envision that this partnership will also allow us to bring clarity and education about a coverage that few of our hospitality customers fully understand, but all need.
Q: How does one effectively price risk against such an unknown quantity?
A: Since Cyber Liability coverage claims are relatively new, pricing the risks appropriately was a major focus and an additional reason for choosing to partner with Beazley. Since Beazley offers Cyber Liability products in other industries, they are well suited to assess the risks faced by the hospitality industry and the appropriately competitive pricing model for our Cyber Liability product.
Q: Are there risk mitigation tools that Distinguished requires/recommends to its customers?
A: State and federal regulations dictate the proper handling of private information. Businesses should always ensure that they are familiar with these regulations and that their employees adhere to them. Also, employers should ensure that staff members are properly trained and are not using systems or networks for any non-work related activities. According to Beazley, human error and system glitches were responsible for nearly two thirds of all breaches globally in 2013.
Q: What would you say to those people who don’t see cybersecurity risk as a top priority?
A: Cyber Liability coverage is often misunderstood, because business owners don’t truly comprehend their level of risk. If a business accepts anyone’s personal information, such as a credit card number, they are exposed. From large corporations to small, main street business, cyber attacks are on the rise. For many small business owners, it may be weeks or months, if ever, before they realize that a breach occurred, since they rarely have the same security in place for their systems as a larger company. Unfortunately, for many business owners, simply the cost of alerting your customers that their information has been compromised can be costly, confusing, and distressing. To simply notify your customers, businesses need to adhere to guidelines in 47 different states where laws regulate the way in which customers must be notified. It is exactly the lack of understanding about the risk and the complexity of these various laws that validates the need for this type of coverage. These claims are new, attacks are on the rise, and we want our customers to have coverage that will give them piece of mind.
