The growing use of information technology in society and industry has major repercussions for everyday life. Increasingly sophisticated means of collecting and storing data are not only changing our working lives and social contacts, but also establishing new parameters for industry, trade and commerce. Electronic data is becoming one of the most valuable assets a company owns as a result of the rapid advances in IT.
For a long time insurers denied that electronic data was a ‘real asset’, and also struggled with determining a rate to charge. It was basically too expensive for an insurer to determine all of the underwriting criteria to create a proper rate and offer the insured an indemnity that was meaningful. To do so meant knowing what data was insured, the value of the data, how it was protected, whether the standards of protection were constant, how frequently data was lost, and what scenarios would result in a catastrophic loss.
Some insurance companies do provide some insurance against total loss of data as part of a property, cyber, boiler and machinery or electronic equipment policy – however the data loss indemnity is almost always sub-limited to a value much, much less than the true value of the data if it was lost and caused a loss of revenue, extra expense or consequential loss.
This leaves the insured with a situation where one of the company’s most valuable assets – data – is essentially under insured by a large margin. Furthermore, in the case of a loss of data, the insured needs to prove that the data existed, that the loss was due to an insured peril, and the expense incurred – all for a sub limit that is almost meaningless in terms of protecting the company’s financial viability.
Data Insurance is a breakthrough, however, in that there are now a few insurers and brokers that are offering a unique, broad coverage policy under license from CIS, a company that developed the process, risk management standards, loss prevention procedures and loss scenarios to overcome the underwriting issues mentioned earlier. Businesses are finally able to insure their data for limits that extend into the millions of dollars – covering them for the costs, revenue loss or brand damage that may ensue.
People, businesses, non-profit agencies and governments all insure their valuable assets and various exposures – such as buildings, cars, equipment, contents, law suits, business interruption, or extra expense. Data Insurance policies now enable the pre-approved insurance of electronic data – often the most important and irreplaceable asset an entity owns – for its full value, rather than a low standard sub limit contained within most property or cyber policies.
Data owners are interested in purchasing this new coverage at this time to protect their business from financial hardship when data is lost due to increased concerns with:
- Hardware and software failures
- Viruses and hacking
- Impact of lost data on lower revenues and profits
- Wanting to improve corporate governance
- The inability to ascertain which data backup companies provide secure facilities and reliable technical assistance
- Protection from lawsuits when customer data is lost