Staffing Insurance: What You Need to Know Now!
 Article 6 in a Series 
What is Cyber Insurance and Do I Need it?

Cyber Insurance is being labeled the new “must have” coverage in a comprehensive insurance program. If current trends continue, cyber insurance coverage just may take its place alongside workers’ compensation, general liability, and employment practices liability as a core coverage for staffing firms.  In other words, any business would be foolish to open without it.

The reason is simple. Virtually every modern enterprise, and certainly every staffing firm, lives and breathes on its information technology applications, data bases and computer systems. When IT goes down, business screeches to a halt.

As more and more companies and their insurers are realizing, this reliance on IT creates a hornets nest of risks that can result in crippling losses that conventional insurance policies won’t respond to. These new issues call for a new category of coverage. 

New Risks
On one hand is the issue of first-party losses (losses that you, the staffing firm suffers). These might include business interruption, which could be caused by a fire or flood, or a malicious hacking by a disgruntled employee, or by a cyber-crook half a world away.

Traditional property and casualty policies might help replace some of the lost hardware, or pay for physical damage to equipment. Yet there is no coverage for the onerous costs of restoring data, reinstalling software, or for lost revenue, since standard policies typically exclude such losses completely. 

It means that a company could be out of business for days or weeks, while also being responsible for the costs of restoring the IT function.  

Ominous Liability Exposures
Perhaps even more ominous are the all-new liability exposures inherent in IT operations. A raft of relatively new legislation makes companies responsible for safeguarding personal and confidential data they collect as part of their daily operations.

Regulations ranging from HIPAA to Sarbanes-Oxley and an array of state laws provide stiff penalties for companies that mishandle personal  data, permit leaks or unauthorized access, or otherwise fail to safeguard sensitive information. These are liabilities that conventional insurance will not cover.

There is also the risk of being sued by third parties for somehow allowing-or failing to prevent-unauthorized access to sensitive information.

The new reality is that criminals, terrorists and even disgruntled insiders or temporary employees are beginning to realize that the real Achilles heel of today’s companies is the IT side of their business. Sensitive data and personal information have now become their prime targets.

The Insurance Options         
Since most standard property and casualty policies do not respond to IT and privacy related losses, and are in fact specifically excluded in most policies, some carriers are beginning to offer cyber products designed to cover these critical exposures.

These cyber products tend to vary from carrier to carrier, as insurance companies try to determine what features and terms are most attractive to customers. The situation is very similar to where employment practices liability was just a few years ago.

As it is with standard insurance products for the staffing industry, not all carriers will offer coverage to temporary help firms. This is due to the broad range of exposure related to many employees working at multiple company locations. But because the exposure is very broad, cyber liability is an insurance product you should seriously consider.

The more businesses rely on information technology as an engine for operations and communication, the more crucial it becomes to protect IT assets with the right coverage.

PS: At CTK/INSURICA, we make every attempt to keep you informed of new products available in the marketplace that will help you with the process of protecting your staffing firm. Cyber Insurance is an example of one of those new products.

Questions: please feel free to email me at RichS@ctkins.com, and I’ll be sure to get you an answer.

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