It’s difficult to miss the rising rates of cybercrime in the UK but what’s even easier to miss is the crucial difference between ‘cyber liability’ and ‘cyber insurance’.
The two terms are often used interchangeably, because they are so closely connected, causing confusion and putting businesses at risk.
They are not the same thing, but we’re here to explain all.
Cyber liability – the third party
Cyber liability is your business’s legal responsibility to others for data breaches, cyber attacks and other digital incidents.
It relates to the risks and potential financial or legal consequences for third parties, ie your clients or suppliers.
You have cyber liability even if you don’t have cyber insurance. You also have cyber liability even if you don’t hold personal data because if your systems are hacked, clients or suppliers could still incur costs or damage, depending on the nature of the attack.
Cyber insurance – the first party
Cyber insurance is the specialist insurance policy designed to protect your business against the financial consequences of cyber incidents.
One element of your cyber insurance will cover your cyber liabilities towards third parties. Another element should cover your own risks, as the first party.
In the event of a cyber incident, first party cover will help with costs most typically incurred by the business, such as:
- Data breach investigation.
- IT forensic services.
- Data recovery and system restoration.
- Business interruption losses.
- Ransomware payments and response support.
- Crisis management and PR support.
Why do B2B contracts often refer to cyber liability?
Contracts allocate responsibility and risk between parties, rather than prescribe specific types of insurance, so they will usually refer to cyber liability.
That’s because legally, when you sign a contract, you assume the risk, not just the requirement to insure it. Legal contracts hold you liable regardless and are only concerned with who is legally responsible for cyber liabilities and not how it’s insured.
Protect your business
To ensure your business is protected, make sure you understand your cyber liabilities and have them covered but don’t neglect your own risks. A good cyber insurance policy will cover your liabilities but also protect the first party, your business, from losses. Still unsure? Speak to our friendly experts.
