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Advanced planning eases cyber claims process

cyber risk

Policyholders can increase the chances of a smooth claims process long before a cyber incident occurs by carefully filling out their cyber liability insurance submissions, consulting with technology experts and making sure they understand their policies’ terms and conditions, experts say.

Raising questions with underwriters on the meaning of clauses, in what is a relatively new and evolving line of insurance, and clarifying the extent of coverage can help avert claims disputes. 

Tara Bodden, general counsel, head of claims, at insurtech managing general agency At-Bay Inc. in San Francisco, said policyholders should carefully consider what they report in their cyber insurance submissions. 

If a company incorrectly answers questions about issues such as security hygiene and there is an incident, “there’s a possibility you will not be covered for that,” she said.

“The big headline there is, when you are actually filling out your application for cyber insurance, make sure you ask people who know about security,” Ms. Bodden said.

She said one issue that has emerged in litigation concerns differences between companies’ privacy policies and security practices. “If you have a privacy policy, make sure your security practices match that,” she said. 

Claims disputes typically involve a difference between underwriters’ and policyholders’ understanding as to what policies provide, said Bhavesh Vadhani, Tysons, Virginia-based cybersecurity, technology risk and privacy practice global leader for CohnReznick LLP, an accounting, tax and advisory firm. 

“Do your research” and get an understanding from the insurance broker what the policy provides, Mr. Vadhani said. Read the fine print and ask the insurer, “What does this particular clause mean, and what are you actually covering?” he said.

James Berry, London-based chief claims officer for Corvus Insurance Holdings Inc., said, “For me, it’s more a case that policyholders should be aware that we work on the basis the policyholder’s presumed to have read and understood” the policy’s terms and conditions and exclusions. 

If there is a lack of clarity during the underwriting process, it “goes back to a two-way street,” he said. “Underwriters ask questions to understand the risk and the answers provided are very important,” and during a cyber event those questions may be highlighted, he said.