This month’s cyber claims case study tells the story of an online retailer that had to notify over 90,000 customers following a breach of credit card details, leading to a damaged reputation and subsequent income loss. To find out how our policy responded, read the full case study here.

The key takeaway points are as follows:

  • As businesses become increasingly dependent on their computer systems to perform critical elements of their operations, it comes as no surprise that financial losses due to system outages are becoming both more frequent and severe. However, brokers and their clients shouldn’t focus solely on system outages when it comes to business interruption.
  • Often referred to as consequential reputational harm, business interruption as a result of a data breach is starting to impact many organisations and can be equally as disruptive as a system outage. In such cases, even though an insured may not have suffered any meaningful system downtime, they can suffer serious reputational harm in the eyes of their customers and suppliers, resulting in a subsequent drop-off in income.
  • The financial impact of a cyber incident can be long-lasting and the value of having longer indemnity periods in cyber policies is becoming increasingly apparent. The insured’s policy with CFC had a 12-month indemnity period in place, but many cyber policies only offer 3-6 month indemnity periods as standard. In this case, had the policyholder only had a 3 month indemnity period, they would only have been eligible to claim for three months’ worth of lost profits rather than 12.

Although the insured was based in the US, the importance of having reputational harm cover will become increasingly relevant to most organisations outside of the US as well. The notification requirements introduced by the GDPR, the Notifiable Data Breaches Scheme in Australia and the Digital Privacy Act in Canada will mean that notifying customers of data breaches will become more common and the risk of consequential reputational harm will increase.

Read the full case study here.