Essential Cyber Insurance Coverage for Regulated Industries

Regulated industries like financial services, healthcare, insurance, certain government entities, and some manufacturing face unique cybersecurity challenges. These sectors must prioritize robust cyber insurance coverage as part of their risk management strategy. Equally important, companies that count these types of highly regulated industries in their primary customer base must also account for the increased risks, requirements, and expectations as their vendor.

Understanding the distinction between first-party and third-party coverage is critical to ensure comprehensive protection against both direct cyber incidents and third-party claims. Many organizations can have great coverage for their own business, yet fail to realize that without third-party coverage, they have no coverage for damages their cyber incident may cause their customers, patients, clients, or constituents.

When selecting cyber insurance, it’s essential to assess the policy for adequate coverage limits, clear explanations of exclusions, and an incident response plan tailored to your industry’s regulations. Also, consider the insurance provider’s reputation for claim settlement and customer service.

Before we dive in, let’s first understand the difference between first-party coverage and third-party coverage.

First-party coverage vs. third-party coverage

Every business today needs cyber liability insurance. To help businesses quickly respond and recover from data breaches, insurance providers have developed two types of cyber liability insurance – first-party coverage and third-party coverage. 

Here’s how they differ:

1. Focus of coverage

First-party coverage:

• • Shields the insured business 
  • Protects against direct losses and expenses resulting from a cyber incident

Third-party coverage:

• • Focuses on liabilities from third parties 
  • Covers claims made by third parties who suffered losses because of the insured business’s cyber incident

2. Costs covered

First-party coverage:

• • Covers only the insured’s direct costs
  • Depending on coverages, it pays for revenue loss, forensic investigations, data restoration, ransom payments, public relations and customer notification services

Third-party coverage:

• • Pays for businesses’ legal expenses
  • Covers cyber-related liabilities, such as data breaches, privacy violations and defamation

3. Reputation management

First-party coverage:

• • Pays for expenses related to hiring public relations firms
  • Aims to restore the brand image of a business after a cyber incident

Third-party coverage:

• • Primarily focused on handling the legal aspects 
  • More concerned with defending against claims and settling third-party disputes

4. Beneficiaries of coverage

First-party coverage:

• • Directly benefits the insurer 
  • Provides direct protection to the insured party against direct losses

Third-party coverage:

• • Benefits third parties, such as a business’s customers, clients and business partners
  • Provides direct protection to those affected by a data breach suffered by the insured business

Key things to consider while shopping for a policy

Here are some key points to consider when shopping for a cyber liability insurance policy:

Coverage

Comprehensive coverage is key to reducing the impact of a cyber incident. Your business can become the victim of a data breach or a large-scale cyberattack at any time. That’s why it’s crucial to ensure that the policy addresses cyber-risks specific to your business.

Limits

Evaluate the policy to understand the coverage limits. The policy that you finalize should be able to handle the potential costs associated with a cyberattack, including legal fees, data recovery and business interruption expenses. 

Exclusions

Study the policy outlines to understand what is excluded. Any limitations in your policy can make your business vulnerable. That’s why it’s crucial to know what is not covered by your insurance.

Incident response

Make sure that the policy has provisions for developing and implementing a cyber incident response plan tailored to suit your business. Without a well-defined response plan, you won’t be able to effectively respond to a cyber incident.

Price

Before finalizing a policy, compare and cross-check various policies, especially their costs and unique offerings. Although opting for the most affordable option can be tempting, it is crucial to ensure that the coverage you choose is best suited for your business needs.

Reputation

It is also important to do your due diligence and research the insurance company’s reputation. Look for an insurer with a good reputation and positive customer feedback. Choose a company that settles claims promptly, as that is a reliable indicator of the level of support you can expect when you need it.

Build a resilient future

Finding the right cyber liability insurance coverage for your business can be daunting. At Reclamere, we understand the complexities of your industry’s needs and offer specialized guidance to enhance your cybersecurity posture. By partnering with us, you can better prepare for potential cyber events and ensure that your insurance policy is an asset, not just a checkbox.

Connect with us today for expert advice on integrating cyber insurance into your cybersecurity framework and build a resilient future for your business in the regulated industry space.