Help Protect Yourself and Your Clients When Selling Cyber Insurance 

E&O claims related to the sale of cyber insurance are on the rise. These situations often arise when coverage is not appropriately mirrored when changing carriers or when an agent lacks the necessary knowledge to correctly place coverage or offer accurate guidance. 

Small-to-medium-sized businesses often have the misperception that cyber incidents only happen to larger businesses – yet cyber insurance is needed by almost any business because most businesses rely on technology to operate. At minimum, small-to-medium-sized businesses have access to the internet and use an internal email system. However, they often have less stringent security than larger businesses, which may make them easy targets as an access point to their suppliers. Many policies include pre-loss risk mitigation services, such as risk management training, that may help to offset security costs for smaller businesses.

However, it’s not just businesses that need cyber coverage. Are you offering cyber to your Personal Lines clients? With the increasing use of internet-connected devices in homes such as refrigerators, washing machines, security cameras, and thermostats, there are more opportunities than ever for hackers to access personal information. Additionally, cyber scams and cyber bullying are on the rise. Unfortunately, clients often don’t understand the value of carrying personal cyber insurance. Agents will need to educate their clients on their personal cyber exposures for clients to see the value in purchasing the coverage.

While it’s a great opportunity to cross-sell, it’s a unique coverage that poses challenges to agents. Policies vary significantly from carrier to carrier, include multiple insuring agreements, and have claims-made and occurrence triggers – plus, the coverage is rapidly evolving. Additional coverage may be needed to sufficiently cover a client’s cyber exposures.

 How can you help your clients protect themselves and mitigate your exposure to E&O claims? These risk management tips can help. 

1.  Be well-educated. Require staff that handles this line to stay on top of cyber insurance news, take training seminars, and keep abreast of any changes among the carriers they place coverage through. 
2.  Limit the number of carriers used for placement. This will help you be well informed of their offerings. 
3.  Carefully review your client’s current coverage and quotes received from your carriers when changing coverage. This can ensure you are mirroring coverages as closely as possible, which can be challenging given the variations in language and coverage among carriers. 
4.  Help your client ensure they have sufficient coverage for social engineering, ransomware attacks, computer fraud, and funds transfer fraud. These coverages respond to some of the most common cyber incidents and are often at the heart of E&O claims.
5. Point out sub-limits and time-sensitive reporting requirements.
   
6.  Determine if the policy will indemnify or merely reimburse the client. Reimbursement policies may offer less in the way of support, which is something clients should consider. 
7.  Determine the client’s exposures to ensure they are not left with a gap in coverage. Coverage for some cyber exposures may be included in other policies including, but not limited to, Employment Practices Liability Insurance (EPLI), Commercial General Liability (CGL), and Commercial Crime. When multiple policies are in place that can respond to cyber incidents, determine the most advantageous one to respond on a primary basis and endorse the “other insurance” clauses, if necessary. 
8. Obtain a signed declination of coverage for your files if a client passes on cyber coverage.

 DON’T LET THIS HAPPEN TO YOU

A customer asked the agent to obtain a Commercial Crime Policy, expressing specific concerns about a business acquaintance who had sustained a loss after a wire transfer was sent to a criminal imposter. The customer indicated he wanted $1 million in coverage for his business for such incidents. To obtain coverage, the agent worked with a broker who provided a crime quote and noted that sub-limits were included for social engineering and telecom fraud. A specimen policy was included.

The agent was unfamiliar with the specifics of the coverage and did not recognize that the social engineering sub-limit of $100,000 would not provide the level of coverage the customer requested. The agent provided the quote to the customer, noting the requested $1 million coverage was being provided. The customer subsequently suffered a substantial social engineering loss. The agent’s E&O coverage paid nearly $500,000 to cover the claim.

LESSON: Be familiar with terms used for cyber exposures. Carefully review any sub-limits that may impact coverage. 

E&O Tip: Implement a Generative AI Use Policy for Your Agency 

With the increasing use of generative artificial intelligence (AI) tools such as ChatGPT, it is vital for agencies to assess the benefits and drawbacks of the use of these tools by staff and clearly communicate their stance.

Privacy and data security must be contemplated when utilizing these tools to ensure that your proprietary data and client information are not compromised. Your staff must understand how they can use these tools in a way that protects the agency and complies with relevant laws and regulations.

These following are examples of acceptable use and prohibited use policies for generative AI tools: 

• Generative AI Acceptable Use Policy
• Generative AI Prohibited Use Policy 

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Help Your Agency Prepare Itself for Catastrophic Weather

Are you aware of our risk management resources related to catastrophic weather? The following can help:

• Emergency Preparedness Insurance Agency Tool Kit – A guide on how to prepare your agency for potential disasters.
• 5 Takeaways from Past Hurricanes – Frequently misunderstood or misinterpreted coverage issues that seem to come to light after a catastrophe has occurred.
• Hurricanes Often Produce More Floods Claims than Wind Claims – Examples of hurricane-related claims, plus suggestions on how to help avoid these situations.
• Be Aware of the Growing Concern of Insurance to Value – Potential claims issues surrounding undervalued property.

In addition, we offer the Contingent Catastrophe Extra Expense Coverage Endorsement. This optional coverage is available to all E&O policyholders for an additional $100. In the event a catastrophe impacts your agency, this endorsement may provide extra funds for things such as setting up a temporary claims office, overtime, and hiring temporary workers.*

Ask your Underwriter for details about this coverage.

 *This summary represents an outline of coverage available from the member companies of the Utica National Insurance Group. No coverage is provided by this summary. All coverages are individually underwritten. Coverage availability, terms, and conditions are dictated by the policy and may vary by state. In the event of a loss, the terms of the policy issued will determine the coverage provided. 

Ready to Help

Are you looking for risk management guidance on a particular topic? Reach out to Tabitha DeGirolano of our E&O team for help at tabitha.degirolano@uticanational.com.

This information and any attachments or links are provided solely as an insurance risk management tool. They are derived from information believed to be accurate. Utica Mutual Insurance Company and the other member insurance companies of the Utica National Insurance Group (“Utica National”) are not providing legal advice or any other professional services. Utica National shall have no liability to any person or entity with respect to any loss or damages alleged to have been caused, directly or indirectly, by the use of the information provided. You are encouraged to consult an attorney or other professional for advice on these issues.