Cyber insurance is a must-have for any business of any size. If you operate online, cyber insurance can protect you against a myriad of threats, including financial loss and business interruption.
Across all UK businesses, there were 2.39 million instances of cybercrime in 2023, making this an urgent problem if you remain unprotected. This guide discusses what cyber insurance will cover and whether professional indemnity insurance is a suitable substitute.
Is Cyber Crime covered by Professional Indemnity insurance?
Professional indemnity insurance is another essential insurance policy for certain UK firms. For companies that provide professional services or advice this policy protects you against claims for negligence, errors and omissions and more, which have caused a financial loss to third parties.
Even though professional liabilities are the primary focus of these policies, you may find that you also have limited coverage for cyber-related risks, including:
Data Breaches – Some policies may cover financial losses if a data breach occurs due to error or negligence that impacts their clients.
Cyber Liability Extensions – Professional indemnity policies may include optional add-ons covering certain cyber risks.
Loss of Digital Assets – If you were held liable for losing or exposing a client’s digital assets, some policies may provide limited coverage.
In 2022, the UK saw a 40% increase in the number of cybercrime victims per million Internet users since 2020. As you can see, professional indemnity insurance can help, but its cyber coverage is minimal. Even those policies that do provide a small element of cover are starting to withdraw.
For this reason alone, professional indemnity insurance should not be viewed as a replacement for comprehensive cyber insurance. Unless your claim meets precise criteria, there’s a strong chance that your professional indemnity insurance provider will deny your claim.
Is cyber liability the same as professional liability?
Both cyber and professional liability fall under the same category of liability insurance. However, these are not interchangeable terms.
Each type of insurance has a different purpose. Let’s run through what each one does:
Cyber liability insurance
Cyber liability insurance protects businesses from financial losses and other liabilities resulting from a cyber incident. These incidents can include cyberattacks, data breaches, or even unauthorised access to sensitive company information.
Your policy will cover various costs, including fees for data breach notification, data recovery, regulatory fines, legal fees and third-party damages.
Professional liability insurance
On the other hand, professional liability insurance is designed to protect businesses or professionals from claims resulting from negligence, errors and omissions, and other forms of professional misconduct.
This is a specialised type of insurance commonly held by architects, engineers, lawyers, investment advisors, doctors and lawyers.
Although an estimated 95% of cyberattacks are aided due to human error, professional liability insurance may only provide limited coverage for cyber incidents.
Do you need both Professional Indemnity and Cyber insurance?
It’s strongly recommended that you invest in professional indemnity and cyber insurance for your business.
If your business offers professional services and faces cyber risks, having both policies is vital for providing comprehensive protection. Additionally, since many attacks involve elements that would fall neatly into both professional indemnity and cyber insurance, it makes sense to have both to reduce gaps in your coverage.
Note that professional indemnity insurance may not be required for certain types of non-professional businesses. For example, an eCommerce site should have cyber insurance, but since they offer no professional services, professional indemnity insurance may not make sense for you.
It’s up to you to assess your business’s needs, preferably with an insurer or a legal professional.
What does cyber insurance cover?
Cyber insurance provides coverage for various losses and liabilities caused by cyberattacks. Whilst optional add-ons are available, most standard insurance policies will cover the following:
- Data breaches
- Third-party liability
- Privacy liability
- Business interruption
- Cyber forensics
- Incident response
- Network security liability
- Media liability
- Legal costs
- Data recovery
- Social engineering
- Cyber risk management
Ensure that you speak to your insurer about precisely what your policy covers. Buying any old policy could lead to serious gaps in your coverage.
What does Professional Indemnity insurance cover?
In the UK, there are an estimated 1.5 million people who hold professional indemnity insurance. This popular type of insurance is designed to cover a range of costs and claims, including:
- Professional negligence
- Legal costs
- Settlement costs
- Errors and omissions
- Breach of contract
- IP claims
- Data breach liability
As with cyber insurance, optional add-ons are available. Talk to your insurer about your options to avoid leaving holes in your coverage.
Why your business needs cyber insurance
Cyber insurance is critical as the online landscape becomes more dangerous. If you’re determined to avoid substantial direct and indirect costs, this type of coverage is a necessity.
Let’s go through the core reasons why your business requires this type of insurance:
You are vulnerable
Did you know the UK experienced the most attacks in Europe in 2022? According to the latest statistics, IT vulnerabilities were the most common intrusion route, almost double the rest of Europe.
In other words, you are bound to come under attack sooner or later.
Successful cyberattacks cost thousands of pounds in direct and indirect costs. Cyber insurance is there for when you need it most. With your policy, your insurer will cover the costs of a cyber incident, allowing you to focus on your recovery.
With medium and large UK businesses seeing an average cost of £4,960 per breach, cyber insurance protects your future.
Often, the biggest problem with cyberattacks is how long it takes for businesses to recover and resume normal operations – if they ever do.
Cyber insurance offers the breathing space and financial capital needed to launch your incident response plan and take the next steps toward normalisation.
Still trying to figure out cyber insurance?
Cyber insurance is a niche policy, and many entrepreneurs lack a firm understanding of what it does and why it’s so beneficial. If you’re still questioning the value of cyber insurance, several other reasons exist for holding this policy, such as:
- Data breach management.
- Protection against cyber extortion.
- Business interruption coverage.
- Third-party liability.
- Risk mitigation.
- Industry compliance.
Ultimately, one of the most significant advantages of cyber insurance is peace of mind. At Stanmore Insurance, we provide UK firms with the peace of mind they need because they know they are protected should the worst happen.
Not every policy however, is suitable for every business. If you want to learn more about coverage options and how much cyber insurance could cost your organisation, contact our team today.