Are you covered for the cloud?

As well as their technology, companies moving to the cloud also need to update their insurance, says broker

Business risk is becoming increasingly expensive, as new cloud-based technologies such as remote working, social media and outsourcing expose companies to new data privacy and regulatory compliance dangers, an insurance broker has claimed.

"When things go wrong with data privacy, it can be expensive: the costs of breach detection, crisis management, notifying affected customers, hiring PR consultants to minimise reputational damage, legal and forensic investigation costs and lost business soon mount up," said Matthew Clark, science & technology director at specialist broker La Playa.

According to Clark, the issue is not simply the need to buy more insurance but to ensure you are covered for the right risks. For example, he said, "because the Internet and IT networks are increasingly international, businesses are often exposed to liability in foreign territories, so you need a policy that protects you wherever you’re sued.”

He cited research by Chubb Insurance (carried out by Ponemon Research abd Symantec) which reported that the average organisational cost of a data breach was £1.9 million, and that the most common cause of a data breach was “negligence” in 41 per cent of cases, followed by 31 per cent “malicious or criminal attacks”.

Clark said that as well as privacy breaches, companies working in the cloud might also need cover against content liability issues such as defamation, breaches of intellectual property rights and confidentiality, and fraud or data extortion. With this week's Windows Azure cloud outage fresh in the mind he added that the risks of business interruption also change online.

Of course, as CloudPro warned last year, insurance is unlikely to truly compensate if data loss pushes a company into administration or even liquidation, say. However, Clark argued that understand and assessing the risks properly still can "provide much-needed protection."

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