How is the GDPR Impacting the Demand for Cyber Insurance?

How is the GDPR Impacting the Demand for Cyber Insurance?
Considering the digital economy that we live in today, cybercrime is the fastest growing threat to businesses around the globe. In response to concerns about data protection, the European Union established the General Data Protection Regulation (GDPR) in May of 2018 to lay out a framework of standards that businesses need to take to protect data for businesses and individuals.
Why Businesses in the U.S. Need to Pay Attention to the GDPR
Even if a U.S. based company does not conduct business with the 28 member states of the European Union, the company would be subject to the requirements of the GDPR if it collected data on someone in an EU country. Given the vastness of the internet, it’s very likely that a citizen of the EU could provide personal data to a U.S. business. If the U.S. business does not abide by the GDPR, it could be penalized with a massive fine. In some cases, the fine could be catastrophic to the company’s livelihood.

Is the GDPR Increasing the Demand for Cyber Insurance?
U.S. companies that don’t comply the GDPR could face hefty fines and other consequences that could cause them to close their doors. Given these concerns, you would think that there would be a rush for businesses to get a cyber insurance policy in place to protect themselves from the liabilities that the GDPR poses. However, despite the GDPR, U.S. businesses don’t seem too concerned yet to purchase this type of protection from cyber liability.

One reason why businesses are slow to secure a cyber insurance policy is that there are uncertainties as to whether this type of liability policy will cover fines associated with the GDPR. While some industry experts are saying that current cyber insurance policies would exclude coverage for these fines, the general belief is that these fines will eventually be covered once the policy language is worked out.

Another reason that businesses aren’t rushing to protect themselves with a cyber insurance policy is that some feel that the GDPR will reduce risk exposure. We’re still only a few months into the GDPR, so only time will tell how effective this data privacy and security regulation is at reducing risk.

How Insurance Risk Services Can Help Identify Additional Opportunities to Serve Insureds
Our team at Insurance Risk Services has been partnering with property and casualty insurance carriers for nearly 40 years to provide them with underwriting support, primarily in the form of thorough, in-person property inspections. When conducting a commercial property inspection, we often have the opportunity to meet face-to-face with insureds. These face-to-face interactions give us the chance to talk to insureds about other areas of vulnerability, including the value of securing a cyber insurance policy in today’s digital world. Because we represent our insurance carrier partners, these conversations help to deepen relationships and often lead to additional opportunities to serve insureds.

Contact us at Insurance Risk Services to learn more about how our accurate underwriting support can open up new opportunities for your business.