Businesses have a great deal of personal information about their customers. Names and addresses are common, but some businesses may also have a customer’s social security number, credit card information or driver’s license number. This type of information is often called “personally identifiable information.” It can be in paper or electronic form. It can be breached by a hacker or exposed when stored in a lost paper file or laptop computer.
When given personally identifiable information by a customer, a business is responsible for keeping it safe. Laws in 47 states deal with these privacy issues and hold businesses accountable if the data they hold is breached or lost. The law that applies is the law of the state where the customer lives, not where the business is, making it difficult for a business with customers in many states to know what its obligations are.
Furthermore, having an outside vendor process, shred or store records doesn’t relieve a business of its liability. If a customer gives his information to a business, that business is the responsible party.
Standard insurance policies do not cover these exposures, but a new type of policy, often called Cyber Liability, can help. Cyber Liability policies can be written to include numerous coverages, but one of the most important is the one that helps a business when there has been a breach involving its customers’ data.
Depending on the insurance company, coverage may:
- Pay the forensic costs to determine whether a breach has occurred and what data may have been exposed
- Pay legal expenses to determine what obligations exist under the various state laws that may be triggered by the breach
- Pay the costs of notifying affected individuals about the breach
- Provide a call center to handle customer inquiries
- Arrange and pay for legally required credit monitoring for affected customers
- Pay any fines or penalties levied against the business as a result of the breach
- Cover paper records as well as those is an electronic form
Data breach is becoming a critical problem, but one that insurance products can now help with. Discuss this valuable addition to your insurance program with your insurance advisor.