What Is Reputational Damage Coverage in a Cyber Policy?

reputational damage coverage

What is Reputational Damage Coverage in Cyber Insurance?
Have you ever wondered what would happen to your reputation if a cyber event struck your company?
What would the damages be?
Is it covered by insurance?
I’m going to answer that question, coming right up.

Okay, let’s start off by saying that no two cyber policies are the same.

There are many policy forms that are drastically outdated and haven’t kept up with the rapid change of security risks and issues, and there is a handful that addresses the most up-to-date risks – but even these are slightly nuanced from one other.

Some policies include a host of “extra” coverages – and some you need to endorse with broadening endorsements to get the broadest protection possible.

And when it comes to cyber risk, getting the broadest protection is critically important.

One of those extra coverages I want to talk about today is reputational harm or damages.

What is reputational damage coverage, and why is it important?

Many types of businesses maintain a confidential or trusted relationship with their clients.

Off the top of my head, I’m thinking of law firms, accounting firms, wealth management firms, payroll companies, real estate brokers, etc. – just about any relationship where private information is shared, money is involved, or confidentiality is important.

What would happen if one of these types of firms had to notify their clients that their firm suffered a cyber breach and the client’s private information may have been stolen?

You’d think that there would be a loss of trust, right?

The reputation of this firm is now tarnished in the eyes of the client.

How bad can this get?

It can get really bad, really fast.

In fact, I know of several situations where long-term clients left trusted business relationships immediately after learning of a breach.

In one situation, 4 of a firm’s largest clients left shortly after breach notifications went out and the company went bankrupt.

Is this type of risk insurable?

Yes, in many good cyber policies reputational harm can be covered.

The intent is to reimburse the insured for the net profit that was lost as a direct result of adverse media surrounding a cyber security failure, breach, extortion demand, or similar situation.

In plain English, Reputational Harm covers your business if it’s hacked, breached, or suffers a ransomware attack and your customers find out about it and leave and you suffer financial damages as a result of it.

Is reputational damage coverage important?

I’d say so, especially for the types of firms and companies that have a trusted relationship with their clients.

Would you stop using your local dry cleaner if they suffered a hack?

Probably not you’d probably still go there out of convenience.

But, what about your wealth manager?

Here you probably would have second thoughts and may change relationships.

Now another related coverage I want to mention is reputational repair which goes hand in hand with reputational harm or damages.

Reputational repair is coverage to pay for crisis management costs which include public relations, media costs, mailings, and other costs incurred to minimize or mitigate the damage inflicted on your reputation by a cyber event.

Together these two coverages are critical for most businesses. Insider secret – they don’t cost a lot either, which is good news.

Do you know what’s in your cyber policy? Or more importantly what’s not in your cyber policy?

If you haven’t taken a deep dive into your coverage – or your agent hasn’t gone through it with you, then maybe you should.

Not confident in your agent’s abilities?

Then let’s chat.

I promise no heavy-duty sales gimmicks or pressure. just a conversation to see how we can help you be more secure.


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