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Professional liability insurance helps reduce cyber risks for business owners

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As significant advances in technology continue to serve as integral tools for businesses and professionals, the increase in use can leave many vulnerable to information breaches. 

An increasing number of companies utilize technology and software to maintain sales data, marketing demographics, compensation structures and above all else, personal information of clients and employees alike.

However, as the need for massive databases containing personal information such as social security numbers, addresses and credit card numbers climbs, so does the likelihood of system hacking and security breaks.

Stolen or compromised personal data can leave a bad taste in the mouths of loyal customers, as well as open doors for predators to the business. Companies that are policyholders for professional liability insurance or errors and omissions insurance can mitigate risks associated with cyber attacks that many businesses are unknowingly susceptible to. 

Surge in cyber attacks
Due to a steady surge in the number of online hacking incidents, many companies are opting to protect their assets and their clients' assets by purchasing insurance policies that protect against cyber intrusions. 

"It is becoming a mainstream assumption that insurance carriers can help organizations with cyber-risk management, both in the traditional risk transfer sense and in the broader sense that they can act as neutral arbiters of cybersecurity best practices," said NSS Labs' Andrew Braunberg in an analyst brief. 

In fact, many companies are looking to the insurance industry to provide added levels of protection to overall risk management frameworks, said Braunberg. 

"US-based public companies must understand and keep abreast of current SEC expectations for cyber-risk/incident disclosure and, just as importantly, current industry best practice for reporting," he said. "And insurance carriers should more fully consider and assess the differences among security vendors and products, in particular the differences in overall security readiness that are achievable based on the specific products used for defense."

Indeed, according to a new survey from the Ponemon Institute, about half of all U.S. businesses have adopted insurance policies that reflect the growing need for cyber asset protection, with another 39 percent poised to buy into a plan in the upcoming future. 

The survey asked companies to disclose which executives were designated decision-makers in regards to the company's cyber insurance policy, with an overwhelming number of respondents citing risk management personnel as having the most influence. Surprisingly, little input was derived from IT teams, according to the research. 

"Enterprises should better leverage information technology (IT) security teams when selecting cyber security insurance and when explaining risk profiles," Braunberg said. 

Either way, results remain the same: Companies that protect themselves through professional liability insurance incur fewer costs and financial losses. 

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