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Cyber Alert: America Underinsured or Uninsured

Cyber ALERT!! – Underinsuring and Uninsuring America’s entities.

America’s nonprofits, municipalities and agencies, and private and public businesses are potentially facing a harsh reality every day that some kind of Cyber event is going to impact them. Just yesterday the Director of the FBI contends that EVERY major American business has been hacked by Chinese operatives- consisting of those who know they have been, and then those who don’t. Yet, even with this disclosure, hacking is not the source of most privacy breaches.

Cyber Liability Insurance is not just a policy. It is a program of coverage components all interwoven and working together to provide what we call a Breach Response Weapon (BRW). The BRW, when the right product is purchased, is the only way to both transfer the risk and mitigate the exposure at the same time.

Despite the increase in the frequency of breach headlines, and the increase in the severity of the breach, many of America’s nonprofit, corporate, and municipal entities still do not purchase the coverage. The total out of pocket cost to respond to a privacy breach is approximately $188 per record breached. The average privacy breach claim is about $188,000. These figures represent many kinds of costs and expenses found under both third party liability coverage and first party expense coverage.

However, most entities still believe that this is a national problem and not a local crisis. On the contrary, it is actually a local problem becoming a national crisis. The largest single exposure ANY entity faces that can result in an event is unintentional employee negligence. Even in the wake of better corporate privacy procedures, human error cannot be overcome.

As a result of this unfounded conviction that “we are not on the radar”, the lack of an event, and a misunderstanding of the actual impact of an event, most remain uninsured. This kind of property fire is too big to self-insure.

An even bigger problem is the underinsuring of America, which occurs in more than 80% of all Cyber coverage countrywide. More and more we are coming across entities who have packaged their Cyber coverage with the P&C carrier, or the D&O carrier. In every case I have seen, these “packaged concepts” offer the Insured the third party legal liability coverage components, but lack the needed first party expense coverage components.

Since almost ninety percent of any one Cyber event is the dollars paid for first party out of pocket costs, this packaging approach leaves the Insured with the false illusion of ample protection. In reality they remain exposed to high out of pocket costs simply uninsured.

Cyber Insurance is a sophisticated insurance product which is intricate in detail and coverage and provides different coverages, exclusions, and features from carrier to carrier. Understanding the different coverage forms and providing competent coverage options is the key to avoiding underinsuring the cyber exposures.

For more information on Cyber Insurance, understanding exposures, and obtaining a quote, please contact us at for immediate response. US Pro Insurance Services is America’s Cyber Insurance Experts, and we can help with all industry types and sizes and classes today!