With so many headlines about cyber attacks, the questions follow.

Review Character Shows Assess Reviewing Evaluate And ReviewsI received the following question regarding cyber.

Hi Allan,

I’m currently in the process of trying to get my head around the available cyber interruption covers and the covers that are provided from the main players in this market.

Most of what I have read looks great on paper however when you get granular, the cover is very limited in what it provides. Most policies only insure “net profit” for the “period of restoration” with a very short indemnity period of anywhere between 28 days and four months and generally sub-limited to an insignificant amount.

As with any interruption claim, Gross Profit (not net profit) needs to be insured and it can take a hit for a much longer time than the period of rectification.

Do you know if there any policy available in the market that provides a proper Insurable Gross Profit loss with a reasonable indemnity period plus AICOW as a result of a malicious impairment to an insured’s computer system?

Whether it’s an endorsement on a property policy that triggers a section 2 claim through a write back or a cyber cover that provides adequate BI cover through an Insurable Gross Profit indemnity, the market seems underdone in this regard.

I feel this is a massive exposure for businesses in 2015 that insurer’s have failed to address.

Cheers,

David [surname and email provided]

My response was:

Hi David, I have read through all the policies on LMI PolicyComparison and I see 2 issues.

The first is, as you raised, is it net profit or gross profit? In all the ones where it refers to Net Profit it goes on to cover wages and ongoing business expenses so this in effect is the old additions method which may have been adopted to more easily explain the cover to the Insured. While I see a benefit in explaining the cover that way, business interruption policies moved to the Difference Method in the early 1970’s in Australia to make it easier to calculate an adequate sum insured.

In summary I see no real problem with the cover, it does, if calculated correctly provide full business interruption cover, that is net profit and ongoing expenses.

The second is when does the period of disruption end. A lot seem to end once the machine /data is reinstated but as with a traditional BI cover, the disruption to the business could go well beyond that date.

I hope this helps.

Regards

Allan

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