Cyber Insurance: Am I Too Small?

NEW YORK CITY—Guiding you through risks and potential underwriting perils, Lance J. Ewing of AIG provides his market-spanning insights. A recipient of the Risk Manager of the Year for Business Insurance and Risk Innovator of the Year awards, Ewing is an internationally recognized authority on insurance, risk management, crisis management and risk financing, among many other insurance and risk-related subjects. At AIG, he serves as the leader for Hospitality and Leisure, as well as the Real Estate Industry Practice Groups.

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Dear Insurance Leader,

I am an owner of a regional real estate agency. Is cyber insurance something I really need?

—Real estate agency owner, MA

Dear Agency Owner,

This is a question that comes up many times. For real estate agents and brokers the likelihood of a computer system being compromised is a real possibility. A data breach or data privacy hack could lead to confidential client or employee information being lost, stolen, misused or the newest trend, holding data for ransom.

While not all data breaches are deliberate, the results can be damaging to a real estate agents credibility and exposure of a clients' and employees data, records, financial and credit information. A cyber breach could also reveal social security numbers, credit card facts, driver's license or identity information and other personal records. You may have information from your clients for loan applications or prequalification that would be of interest to not just hackers but thieves who may obtain hard copy documents in file cabinets or desk drawers.

A data breach response can be expensive for a real estate agent or agency. Data breach insurance (aka cyber liability insurance) can provide coverage for a host of expenses. Some expenses that may be covered under a policy are notification expenses to certain expenses associated with mailings to inform all affected parties of the breach; advertising expenses coverage designed to address the issue of the breach; monitoring services coverage for related expenses for security alert systems; legal services expenses for ensuring that the real estate agency is in compliance with all compulsory regulations; crisis management expenses to pay for responses from the agency designed to mitigate reputation loss.

There are a number of other expenses related to data breaches that could effect an agency if it does not have the proper insurance. Some of these expenses are one time payments while others could be are continuing.

In addition to all these expenses there is the ongoing cost of trying to regain your local consumer and public trust.

Please see the interview with Greg Vernaci of AIG related to cyber insurance and exposures.

For more information contact your insurance agent/broker or your insurance company.