Proposed Regulations Warrant a Closer Look at Your Cyber Liability Insurance
Posted on: November 22, 2017 by Signature Insurance Group
Following the Equifax data breach which left 145 million consumers private information exposed, federal lawmakers are showing a renewed interest in drafting cyber security regulations. Surprisingly, the United States’ main cyber security laws still date back to 2002’s Homeland Security Act and various other bills from the 1990s, making many regulators eager to update the rules. With so much uncertainty about near future regulations, one of the best things any business can do today is invest in cyber liability insurance.
Attempts to institute updated cyber security rules are not new. In 2016, the Federal Reserve issued notice that it release its own proposal, but industry insiders convinced regulators to hold off. After all, they noted, there are already over 2,000 current and proposed rules and regulations that have failed to keep consumer data safe.
Now it is Congress seeking to pass a bill that would make businesses more responsible for prevention and more financially liable in the event of a breach. Despite previous legislation failing to gain enough support, Rep. Blaine Luetkemeyer, R-Mo is convinced his new bill could seal the loopholes that have left other bills dead in the water. One issue Luetkemeyer hopes to address is the inconsistency of state laws on notifying consumers when their data is breached, leaving companies that do business in multiple states confused about how much time they have to alert their customers. More importantly, this bill would seek to address the issue of liability and penalties. Luetkemeyer expects to have his bill on the floor in early 2018.
What does this mean for U.S. businesses when nearly all of them have some degree of cyber risk? Right now, it is hard to say. Some of the confusion comes from the multitude of parties trying to have a hand in shifting the way businesses protect their data as well as how much they are held responsible in the event of a cyber attack. The Federal Reserve, the Securities & Exchange Commission, several congressional committees, and at least 41 state governments are all putting a chef in the kitchen, placing businesses in a precariously uncertain situation. That’s why all companies must anticipate the possibility of increased fines and penalties and must plan ways to pay these.
While future regulations are unknown, the odds are that the government, facing the public’s ire over the Equifax breach, will institute harsher penalties for businesses that fail to keep consumer data secure. Luckily, many cyber liability insurance policies cover these government fines and penalties as well as offering coverage for restoring data, notifying consumers, and other related costs. Business owners and executives must check today to ensure their policies cover state and federal government fines before the increases are approved.
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