Responding to Cyber Needs in Personal Lines

Nearly half of Americans were hacked in 2014, according to the Ponemon Institute. And Trend Micro predicts 2016 will be “the year of online extortion.”

While commercial clients can protect themselves with a rapidly growing range of cyber liability policies, equivalent coverage doesn’t exist for individuals, who actually “have the biggest exposures and biggest risk factor,” says David Derigiotis, corporate vice president and director of the Professional Liability Center for Excellence at Burns & Wilcox.

In personal lines, Bill Gatewood, corporate vice president and director of personal insurance at Burns & Wilcox, explains that “insurance companies are trying to figure out if it’s an exposure they want to cover” and are often compelled to exclude cyber liability from personal umbrella policies due to the interconnected nature of some risks.

For example, if a defaming photo reaches 17,000 people, “are those 17,000 individual claims, or one claim and one event?” Gatewood points out. “Until there’s some law or case precedent, I think insurance companies will wonder what they’re getting into.”

However, because high net-worth individuals have more to lose, many affluent personal lines carriers have partnered with cyber security firms to better protect their assets. Loss control services include thorough background checks for domestic staff, as well as assessments of a family’s personal devices: Are they secure? Do users interact with false profiles? And does the family provide too much personal information on social media?

“These services are available for free or at a reduced cost,” Gatewood says. “It’s something agents should push more and talk to their clients about, like they would with any other exposure.”

What about the average personal lines consumer? Many standard market carriers offer some form of identity theft protection. “The question agents should be mindful of is, ‘What exactly is this covering?’” Gatewood advises.

Whether the coverage offers reimbursement or remediation, “agents need to understand what they’re selling,” Gatewood cautions. “If an exclusion exists in the underlying policy, make sure your clients understand that.”

The alternative, Derigiotis says, is better risk management. Similar to commercial lines cyber liability, “it’s not just about selling a policy, but strengthening their overall posture and education them,” he suggests. “You have to think about their vulnerabilities and what you can do to close those gaps.”

Jordan Reabold is IA assistant editor.