Ultimate Policy of Liability Protection
Every financial professional doing business today—life/health insurance agents, property-casualty insurance agents, securities brokers, registered investment advisors, real estate agents and broker-owners—operate in an online environment. They might not actually close insurance or financial transactions online. But they use the Internet to support nearly every facet of their sales and service operation. Thus, even financial professionals who sell their wares face-to-face with prospects still are highly exposed to Internet risks. Which is why every online business needs E&O insurance in order to minimize financial losses related to electronic data breaches and cyber crimes.
Financial professionals should realize they are exposed to online risks just as classic e-commerce firms are. Even though they are not selling tangible goods from an online storefront like Amazon, they use the Internet to speed the processing and issuance of intangible financial services. Plus, they collect a great deal of information about prospects during the sales process, which resides on their agency computers and is subject to data breaches. Here are just a few of the risks to which online insurance or financial businesses are exposed:
- The threat of individual hackers. Hackers no longer target only large corporations, they frequently attack small and medium-sized firms as well. Breaking into company data systems with weak, improperly configured data security, hackers can identify, steal, and sell your prospects’ and clients’ personal information before you even have realize a data breach has occurred. Worse, hackers can be lone wolves, both domestic and foreign, as well as members of large international crime syndicates. With the talent and resources of criminal organizations behind them, hackers often have a field day preying upon financial-services professionals, many of whom are older and less knowledgeable about computers.
- The threat of internal employees. Although external hacking might originate from countries thousands of miles away, it also can result from the actions of malicious employees. For example, a survey by the Ponemon Institute found that nearly 60 percent of employees who had been laid off or fired or who had quit their firms admitted to stealing company financial data or confidential customer information. Many such events are the result of companies hiring candidates without effective pre-employment screening.
- The threat of mobile devices. Financial professionals often work at home or at client locations, using their mobile devices to communicate with their agency databases. However, if they lose their phone, tablet, or laptop or their device gets stolen, criminals can both access data residing on that device or use it to break into the main-office computer. As a result, mobile computing has become one of the leading sources of cyber breaches and related criminal activities.
- The threat of third-party service providers. Financial professionals often work with service providers who facilitate insurance/investment/real estate transactions. These might include motor vehicle operator data firms, home inspection companies, or medical exam providers. Whatever the type of firm, hackers can intercept customer data flowing from the service provider to the agent, causing loss to the customer as well as to the financial professional.
In short, any financial professional in business today is exposed to extensive cyber risks. For example, according to the Ponemon Institute, the average cost of a 2014 data breach was $214 per record, which can really add up when thousands of records are involved. And that number is even higher today. One reason these costs are so high is that data breeches trigger mandated customer disclosures and remedies (required in 46 states).
Bottom line: data breaches can cause huge financial exposures to financial professionals resulting from claims from victimized customers as well as from mandated regulatory expenses. Even practitioners in small agencies—with one or several employees—must prepare themselves to withstand the full financial impact of online cyber attacks.
The good news? Contemporary E&O insurance policies are designed to protect financial professionals against traditional losses as well as against modern cyber risks. This adds up to the ultimate policy of liability protection.
Designed to Protect Your Finances Should You Get Sued
All E&O insurance policies are designed to protect your finances should you get sued. But modern policies define “claim” broadly so that you’ll be protected against traditional as well as selected cyber-related risks. The goal: to make sure financial losses that result from errors and/or omissions in how you conduct your professional duties will not wipe you out financially.
Traditional losses include things such as failing to properly assess a client’s insurance risks or tolerance for investment risk or not responding to a service request on a timely basis, resulting in financial loss to a customer. But the range of contemporary cyber risks ups the ante greatly. This is why the latest policies often include network risk and privacy claim endorsements. This gives traditional E&O insurance policies the ability to protect financial professionals against the financial implications of not properly doing business online.
Case in point. EOforLess.com, a leading online provider of E&O insurance for financial professionals, now includes client network damage and privacy claim endorsements in its life agent professional liability policy form. The former means insureds are covered against written demands for monetary damages due to an alleged security breach or electronic infection that caused network damage to a customer’s network. This damage must have occurred during the insured’s rendering of professional services.
Similarly, under the latter endorsement, privacy claims are defined as demands for monetary damages resulting from the insured’s act or omission resulting in the customer’s privacy injury and/or identity theft. Again, the alleged damage must have occurred while the insured was engaging in his or her professional duties.
What this means is that financial professionals who purchase E&O insurance through EOforLess.com also have some protection against cyber risks, subject to the full definitions contained in the network risk and privacy claim endorsement (see policy). This is in addition to the protection they already have against traditional errors and omissions committed offline.
You Can Protect Yourself Against It
So whatever the risk financial professional face—online or offline—you can protect yourself against it with a high quality, affordable E&O insurance policy from EOforLess.com. This coverage will pay for your attorney fees, court expenses, and the costs of losing a legal battle, subject to your policy limits. In today’s rapidly changing environment, a mix of traditional and high-tech protection is exactly what financial professionals need. Are you fully protected today or are you subjecting your business to unnecessary risks?
For more information about securing E&O insurance for your business, visit EOforLess.com today for more information.