Businesses today encounter different kinds of risks that can endanger their activities, image, and profits.
Two critical types of insurance— Technology errors and omissions insurance (Tech E&O) and Cyber Insurance—stand as pillars of protection.
Understanding their nuances, coverage, claims examples, and how to determine the right coverages is essential for any business.
We specifically focus on cyber insurance technology errors, highlighting the distinction between technology errors and omissions insurance and cyber liability insurance.
The Silent Perils of Cyber Threats
Cyber threats are silent, often unnoticed until they arrive with devastating impact.
These threats encompass a range of malicious activities, including phishing, malware, ransomware, and denial-of-service attacks.
The consequences of a cyber incident are severe, leading to stolen data, financial consequences, business interruption and customer trust.
The cost of a cyber-attack extends beyond financial losses; it also includes long-term reputational damage and the loss of competitive advantage.
For technology companies, adopting a proactive stance, implementing comprehensive cybersecurity measures, and incident response plans to mitigate these risks is crucial.
Similarities
Tech E&O and Cyber Liability insurance coverage both aim to protect businesses from the financial repercussions of technology-related risks. Here are some key similarities:
Cyber Threat Protection: Cyber liability insurance protects against a wide range of cyber incidents, including data breaches, cybercrimes, and other threats that could compromise customer data and the company's network security.
Third-Party Coverage: They provide coverage for claims made by third parties, such as clients or customers, who may suffer losses due to a business’s technology services or data breaches.
Risk Management: Both policies are part of a comprehensive risk management strategy for businesses that rely on technology and handle sensitive data.
Both types of insurance aim to address cyber risk, offering a dual approach to managing digital threats and ensuring comprehensive protection for businesses in the digital age.
Differences
While there are overlaps in coverage, Tech E&O insurance and Cyber Liability insurance are distinct in several ways:
Coverage Focus: Technology errors and omissions insurance primarily covers claims related to professional services, such as negligence or failure to deliver promised services. Cyber Liability insurance, on the other hand, focuses on first-party and third-party losses due to cyber events like a data breach.
Policy Intent: Tech E&O insurance is designed to cover errors, omissions, and negligence related to technology services provided to clients. Cyber Liability Insurance is intended to cover the costs associated with a cyber event affecting the company’s own data or that of their clients.
Claim Types: Tech E&O insurance claims often arise from professional mistakes that lead to financial harm for a client, including breaches caused by such errors. Cyber insurance claims typically stem from incidents like hacking, where the company or its clients’ data is compromised.
Tech E&O Insurance Claims (Data Breaches, Contracts, & Negligence)
Between how to handle sensitive customer data and where coverage falls in your cyber insurance policy, here are cyber related incident claim examples.
Data Breach:
We look at the Change Healthcare breach that cost United Health Group $22 million. When a data breach occurs and data is held ransom, cyber insurance can help recover financially.
Breach of Contract:
If a software firm fails to deliver a project due to technical issues they did not foresee, it may lead to a lawsuit for missed deadlines.
Negligence:
As a managed service provider (MSP) or managed security service provider (MSSP) who was unable to identify an ongoing cyber event or customer data breach for a business they are contracted to work with, costing that business time and money in responding.
This may lead to a lawsuit for negligence in identifying and mitigating a cyber attack, with legal costs accruing quickly.
Blending Tech E&O Insurance and Cyber Liability Insurance
Blending Tech E&O and Cyber Liability insurance is a strategic approach that can provide comprehensive coverage for businesses operating in the technology sector.
Benefits of Blending:
Enhanced Coverage: A blended policy ensures that both professional errors and direct cyberattacks are covered, providing a safety net for a variety of incidents.
Cost: By finding an insurance company who can write both the Tech E&O Insurance and Cyber Liability, they are able to offer more flexible pricing.
When considering blending Technology Errors & Omissions and Cyber Liability insurance, businesses should:
Assess Risks: Evaluate the specific risks associated with their operations, including the potential for data breaches and professional errors.
Consult with Experts: Work with insurance professionals to determine the most appropriate coverage options based on their risk assessment.
Review Policy Details: Carefully review the terms, conditions, and exclusions of the blended policy to ensure it meets their needs.
Crafting the Right Coverage: An Art and Science
Finding the best insurance coverage for your business is a complex process that requires a deep knowledge of your specific risks, business model, and industry regulations.
The coverage must be designed to address the unique challenges and threats faced by your business, ensuring that you are protected against both common and emerging risks.
This process often involves working with insurance professionals who can provide insights into market trends and help customize a policy that aligns with your business objectives.
You can find more information on Jake Nystrom, a cyber insurance specialist, through his LinkedIn page.
The Takeaway
The takeaway from this analysis is clear:
Technology Errors & Omissions (Tech E&O) and Cyber Insurance are not mere checkboxes on a list of business requirements; they are vital components of a strategic approach to risk management.
Tech E&O addresses professional services and advice, while Cyber Liability focuses on data breaches and cyberattacks.
By understanding their similarities, differences, and how they can be blended, businesses can ensure they have the necessary layers of protection in place.
Need Tech E&O or Cyber Insurance?
As a cyber insurance specialist, I have the experience and expertise to help you navigate the complex and evolving world of cyber risks.
Whether you need standalone cyber insurance, tech E&O, or a combination of both, I can help you find the right solution for your business.
I work with leading insurers who offer comprehensive and customized policies that cover a wide range of cyber incidents, such as ransomware, phishing, denial-of-service attacks, data breaches, and more.
If you are interested in learning more about cyber insurance and how it can benefit your business, please visit our website.