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Tag: Cyber insurance

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Business Insurance Insurance Insights

Why Run-Off Cover Matters More Than You Think

When we asked our Insurance Advisors what cover they wish clients took more seriously, one answer stood out: run-off cover.

Many business owners with Professional Indemnity insurance cancel their cover when they retire, sell their business, or stop trading.

They often think they no longer need insurance.

But without run-off cover, they will not be protected for work they did in the past.

What Is Run-Off Cover?

Run-off cover is an extension to Professional Indemnity insurance. It protects a business after it stops trading.

Professional Indemnity insurance is a claims-made policy. Because of this, it is important for businesses to add run-off cover.

To understand this, it helps to see how different types of insurance work.

Occurrence-Based Insurance (e.g. Public Liability)

Most insurance, such as Public Liability insurance, respond based on when an incident happens.

For example:

  • A business had Public Liability insurance from 2010 to 2015
  • Someone slipped at the business premises in 2014
  • The claim was made in 2020

In this case, the policy from 2014 can still respond. This is because the incident happened while the insurance policy was active.

Claims-Made Insurance (e.g. Professional Indemnity)

Professional Indemnity insurance works differently.

It is a claims-made policy. This means there must be an active policy when the claim is made.

For example:

  • A business had Professional Indemnity insurance from 2010 to 2015
  • The business stopped trading and cancelled the policy in 2016
  • A claim was made in 2020 about advice given in 2014

Even though the business had insurance when the advice was given, there is no active policy in 2020 when the claim is made.

Because of this, there will be no cover to protect the business.

Without run-off cover, the business will need to pay legal costs, settlements, or compensation themselves.

Other common claims-made insurance include:

  • Cyber Insurance
  • Management Liability insurance

How Run-Off Cover Helps

This is where run-off cover is important.

If a business takes out run-off cover after it stops trading, it can still be protected if a claim is made later.

Run-off cover is especially important for:

  • Retiring business owners
  • Businesses being sold
  • Professionals changing industries
  • Anyone cancelling a claims-made insurance
Small business owner speaking with insurance broker about run-off cover protection

Why Run-Off Cover Matters

Claims for advice or professional work can take years to appear.

Sometimes a problem is not found until long after the job is finished.

The Good News

Run-off cover is often cheaper than active insurance.

The cost can also go down over time as the risk reduces.

Many industries suggest around 7 years of run-off cover. But the right time depends on the business, contracts, and industry.

Speak to Your Broker Before Cancelling Cover

It may feel natural to cancel insurance when closing a business or retiring.

But without understanding future risk, it can lead to serious financial problems later.

Before cancelling any claims-made insurance policy, speak with your broker about run-off cover.

A short conversation today could help protect you from a costly claim in the future.

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Business Cyber Insurance Insurance Insurance Insights

AI in Business: Powerful Tool, New Exposures

Artificial intelligence in business: Insurance to manage AI risks_Hero

Artificial Intelligence in business is now part of everyday operations. It helps with admin tasks, data analysis, and customer service. It can also help write messages and emails. AI is a useful tool for saving time and improving efficiency.

For many businesses, using AI is no longer a choice. It is becoming necessary to stay competitive. But every new tool brings new risks, therefore, it is important to understand these risks before relying on AI.

Understanding AI

A simple way to think about AI is to compare it to your home. A robot vacuum or dishwasher can save you time. But they only work well if the space is set up properly. If there are items on the floor, blocked pipes, or the machine is too full, problems can happen.

AI works in the same way.

The more AI is used in your business, the more important it is to control how it is used. You will need to manage what it can access and who is responsible for it.

Without clear rules and controls, businesses may face challenges. Effective AI risk management can help reduce:
  • Data privacy and confidentiality breaches
  • Cyber attacks or system failures
  • Incorrect results or false information
  • Intellectual property or copyright problems
  • Legal or regulatory issues
Artificial intelligence in business: Insurance to manage AI risks

The Role of Business Insurance for AI

From an insurance point of view, protection must keep up with new technology.

Many insurance policies do not clearly cover AI-related problems. This is common when data, cyber risk, or professional advice is involved. Just as you protect your home and contents, you should also protect your business. This means checking your insurance regularly and making sure your coverage matches how your business uses technology, including AI.

Keeping Business Efficient and Protected

AI can make running your business easier and faster. The key is to set it up properly and ensure you have the right protection in place.

If your business is starting to use new technology or is expanding its use of AI, now is the time to talk to your broker. A review of your risk management and insurance cover, including AI risk management strategies will help make sure your protection grows with your business.

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Cyber Insurance

How to navigate rising cyber insurance premiums

How-to-navigate-rising-cyber-premiums

Survey after survey, business executives have unanimously agreed to one thing: the risk of a cyber attack as their biggest fear. Reviewing the most recent Allianz Risk Barometer, cyber incidents and business interruption tie as the top concerns of Australian businesses, with over 40% of responses to these risks.

These results come as no surprise to cyber security experts, with cyber crimes becoming increasingly common especially since the pandemic began. At the start of Covid-19, we saw a spike in the number of ransomware attacks against businesses of all sizes. With the continuous evolution and advancement of these ransomware, they are becoming more successful in their attempts to harm organisations, costing businesses billions of dollars every year. With many of us continuing to work remotely in the endemic stage, there are no signs of cybercrimes slowing down.

According to the Australian Cyber Security Centre (ACSC), the 2020/21 financial year saw over 67,500 cybercrime reports made via ReportCyber. In an everyday perspective, one cybercrime is reported approximately every eight minutes in Australia. That’s a staggering increase of nearly 13% from the previous financial year. The average 2017 cyber claim has risen over three times the severity of previous years, with ransomware incidents making up over 30% of claims. With cyber claims on the rise, it is no surprise that insurers are tightening their belts to accommodate the high levels of risk and cost of claims. The result of this will ultimately see the cost of premiums go up as well.

What does this mean for SME business owners?

As insurers are becoming more stringent with their requirements, it is increasingly difficult to get covered against cyber risks. You will need to show insurers that you are taking the necessary (and improved) steps to prevent a compromise to your IT systems. A previous mitigation plan may no longer apply as it could be insufficient to modern malware, and it will be tough to secure an insurer who will be willing to underwrite the risk. For bigger companies with an in-house IT department, preparing an updated mitigation plan may not be an issue. However, for small companies without a dedicated IT security team, this can prove to be a challenge.

Fortunately, there are steps that SMEs can take to meet the strict criteria set out by insurers. Mitigation is key when it comes to cyber security. The help of an experienced insurance broker can help bridge the gap and make it less complicated for small businesses to get covered. Remember, not all cyber policies offer the same level of protection. It can be challenging to determine the best insurance policy for your business. Engaging a broker will not only ease the application process, but they will also advise the steps you need to take to ensure your business continues running smoothly.

At East West Insurance Brokers, we know what the insurers are after. We’ll learn the ins and outs of your business and work with you to create a cyber security plan so you can get a fitting cyber insurance cover for your business. With hackers always at work and cyber attacks occurring more frequently, it’s best to act now before it is too late.

1800 809 132 | he***@******om.au | www.ewib.com.au

Important Note: All insurance policies have exclusions. Please refer to the Product Disclosure Statement or Policy Wording to decide whether an insurance policy meets your needs.