Differences Between Traditional and Cyber Business Interruption Policies

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When organizations face large-scale disasters or other unexpected losses, ensuring business continuity is often a top priority. Yet, various losses may make it challenging for organizations to avoid operational disruptions or temporary shutdowns. In these instances, even brief closures can carry costly consequences. Fortunately, that’s where business interruption (BI) insurance can help.

BI insurance can offer much-needed financial protection when organizations’ usual business activities are interrupted due to covered losses. This type of coverage is typically available through a few different commercial insurance policies. Traditional BI coverage can be purchased as a supplement to commercial property insurance or a business owner’s policy (BOP), whereas an alternative form of BI coverage can be secured via cyber insurance. Nevertheless, there are several differences between traditional and cyber business interruption policies, including when they apply and what they cover. 

Traditional Business Interruption Insurance

Traditional BI insurance is typically added onto a commercial property insurance policy or comprehensive insurance package, such as a BOP. This coverage generally includes financial protection for the various expenses that can arise if an organization is forced to pause its operations or temporarily close its doors due to a covered loss. Such a policy may reimburse these operating costs:

  • Income that an organization would be earning if it were running normally
  • Commercial mortgage, rent, lease, loan and tax payments due during a disruption
  • Payroll expenses to maintain employees’ wages amid a closure
  • Relocation costs related to an organization’s move to a new or temporary location during a disruption
  • Commission and training costs stemming from an organization having to replace damaged tools or machinery amid a closure and educate workers on how to use the new equipment
  • Extra expenses that an organization reasonably incurs (beyond typical operating costs) during a disruption to help it get back up and running

Examples of covered losses under traditional BI insurance include a range of perils, such as fires, theft, vandalism and certain natural disasters. For instance, if a fire destroys the kitchen in a restaurant, this coverage may help reimburse the business for lost income and employees’ wages while it temporarily closes for repairs. With traditional BI policies, some insurers may also offer contingent business interruption (CBI) coverage, which provides financial protection for operational disruptions caused by covered losses among suppliers and business partners. Some insurers may also provide civil authority coverage, which can help compensate expenses stemming from government-mandated business closures (e.g., a citywide curfew, local evacuation order or temporary road closure).

Cyber Business Interruption Insurance

As its name suggests, cyber BI coverage is solely available through the purchase of a standalone cyber insurance policy. This relatively newer coverage offering has become increasingly common as organizations expand their digital operations and invest in various technological advancements, thus driving up their associated cyber exposures and leaving them more susceptible to disruptive attacks. Even so, not all insurers include BI coverage in their cyber policies; with this in mind, organizations should carefully review their policies for this offering rather than assume they have coverage. Cyber BI insurance usually provides financial protection for costs stemming from an organization experiencing technology failures (e.g., system shutdowns or network outages) and related operational disruptions due to a covered loss. Such a policy may help reimburse many of the same operating costs as traditional BI coverage, including lost income, employees’ wages and extra expenses.

Examples of covered losses under cyber BI coverage include a variety of security and privacy events, such as data breaches, social engineering scams and ransomware attacks. For instance, if an online retailer’s website gets temporarily shut down due to a ransomware attack, this coverage may help compensate the business for lost profits incurred while the website is offline. With cyber BI coverage, some insurers may also provide financial protection for digital disruptions caused by human errors (e.g., an employee accidentally downloading a harmful computer virus) or malfunctioning software (e.g., an organization’s network unexpectedly freezing during a routine system upgrade). Further, some insurers may offer cyber CBI coverage, which can help reimburse expenses arising from third-party cyber events that result in software provider shutdowns or cloud vendor outages.

Business Interruption Coverage Comparison

Despite some similarities, traditional and cyber BI policies are not the same. Here’s a coverage comparison to highlight the main differences between these coverage offerings:

Coverage Triggers

Both traditional and cyber BI policies have a waiting period, which refers to the amount of time that must pass once a loss occurs before coverage can be triggered. Under traditional BI coverage, the waiting period is typically 72 hours. With cyber BI coverage, however, this period is often shorter. Since cyber events happen quickly and are generally resolved faster than losses caused by property-related perils, the waiting period for such coverage is almost always less than 24 hours, usually between six and 12 hours.

Period of Measurement

In the scope of BI coverage, the period of measurement pertains to the calculation of lost income caused by an operational disruption. Traditional BI policies primarily apply to commercial property losses that pause typical business activities for long periods, making it relatively easy to determine the period of measurement. On the other hand, digital disruptions stemming from cyber losses may only last for hours or days, making it more difficult to calculate lost income correctly. To accurately determine the period of measurement and ensure sufficient reimbursement of lost income with cyber BI coverage, it’s best to collect more detailed loss data, such as hourly profit statements and sales records.

Period of Restoration

One key factor in determining the overall value of any BI loss is the period of restoration, which refers to the total length of an operational disruption. In most cases, the period of restoration is measured from the start date of a loss (e.g., when property damage occurs or a cyber event initially strikes) until the affected organization fully recovers and resumes normal operations (e.g., when property repairs are completed or digital assets are restored). The period of restoration is often pretty simple to determine when it involves property damage, but cyber events aren’t as straightforward. There can be far less certainty regarding when cyber events start and end, as there could be minimal evidence of physical recovery. What’s more, some cyber insurers may even define the period of restoration differently than others, prompting more confusion surrounding cyber BI policies than traditional BI policies. Considering these difficulties, it may be necessary to closely review policy wording, consult forensic accountants and assess additional loss elements (e.g., how and when cyber events were detected and resolved, what technology was affected, and which operations were paused) to correctly calculate this period following digital disruptions.

Reputational Losses

When organizations encounter traditional BI losses, they usually don’t have to worry about reputational damage, as these losses generally stem from perils out of their control. Yet, with cyber BI losses, stakeholders may partially blame organizations for their involvement in cyber events, especially if these events involve a breach of confidential data or are caused by preventable security failures. Consequently, organizations may experience prolonged profit losses due to diminished customer loyalty even after recovering from cyber events and associated digital disruptions. That’s why cyber BI policies may offer coverage for reputational losses, whereas traditional BI policies do not.

Discover More About BI Insurance

While there are a number of differences between traditional and cyber business interruption policies, both forms of coverage can prove valuable and offer significant financial protection to organizations facing operational disruptions. Organizations can consult trusted insurance professionals to learn more about these coverage offerings and discuss their specific BI insurance needs. 

For more business coverage solutions and risk management guidance, contact an Acentria Insurance team member today.

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Rob Wagner

Executive Vice President | Director of Sales, Southeast Region

With over 15 years of insurance industry experience, Rob focuses on growing organic growth throughout the entire Southeast region for both Acentria Insurance and Foundation Risk Partners. Working alongside both executive leadership and territory sales leaders, Rob is instrumental in producer training, increasing retention and expanding our organizational footprint.

As a self-proclaimed Army Brat, he was born in Fort Benning, GA, but has moved 27 times and resided in 40 different houses… all before college! His father proudly served our country for 28 years! As a graduate of Florida State University with a degree in Business Management, Rob also holds an MBA from Stetson University. A producer at heart, he specializes in large property, senior living, management liability and workers’ compensation. He enjoys meeting new team members and finds his personal success in seeing producers succeed.

In his free time, he enjoys spending time with his wife of 22 years and their two daughters. Together they enjoy boating, offshore fishing and exercising.

Mike Freeman

Mergers & Acquisitions

Leading the Acentria Mergers & Acquisitions team, Mike works with those agency principals and leaders who are interested in furthering a potential partnership with Acentria Insurance.  With over 35 years of finance and insurance experience, Mike and his team showcase the various benefits of partnering with Acentria. He works with principals through the initial phases to evaluate agency operations, books of business as well as planning and implementing fully comprehensive migration and implementation plans. He served 25 years in the banking industry in various executive-level positions transitioning to insurance in 2011 as Chief Financial Officer for Acentria Insurance. In 2017, Acentria Insurance partnered with Foundation Risk Partners where his major focus became leading Acentria Insurance’s mergers and acquisitions team.  

Mike is a graduate of Auburn University. He is dedicated to serving his community having held numerous leadership positions including Chairman for the American Heart Association; Chairman Mental Health Association; Chairman Destin Chamber of Commerce and Board Member for United Way Okaloosa-Walton Counties. Mike is a 27-year resident of Destin, FL and enjoys spending time with his wife of 35 years, Yvonne and their two adult children and their families.

Jenny Cirioni

Vice President, Operations
Northeast, Florida

Todd Lawrence

Executive Vice President
Southeast Florida

Rob Wagner

Executive Vice President
Southwest Florida Region

Alan Florez

Executive Vice President, National Sales

Alan leads new business growth strategies and expansion, guides the development of resources and training for Sales Producers and their partnerships with Carriers. With over 15 years of industry experience, Alan also leads the Acentria Public Risk divisions working with municipalities and government entities for their coverage needs. He was appointed to the Halifax Health Board of Commissioners December 2020 and also serves as an Executive Committee member for our parent company, Foundation Risk Partners.

Previously, Alan served as Governor Jeb Bush’s Deputy Director of Legislative Affairs and Special Assistant. He is a former member of the University of Central Florida Board of Trustees and currently volunteers his time with the Florida Council of 100, Futures Foundation of Volusia County Schools and the Community Foundation of Flagler and Volusia. Alan holds a bachelor’s degree in Political Science from the University of Central Florida.

Anne Kraus

Senior Vice President
Commercial Lines Operations

Teresa Fillmon

Vice President
Small Business Unit

Alex Doberstein

Vice President
Benefits Resource Leader

Eric Austin

Operations Lead
Port St. Lucie & West Palm Beach

Luke Wolkers

Executive Vice President
Employee Benefits

Chris Tolland

Executive Vice President
Northeast Florida Sales

Brian Stanton

Executive Vice President
Southeast Florida

Nathan Marks

Executive Vice President
Northwest Florida

Jason Cruse

Executive Vice President
Central Florida Sales

Jackie Shaw

Senior Vice President
Agency Operations

Jessica Parkhurst

Senior Vice President
Marketing & Branding

Doreen Castro

Senior Vice President
Personal Lines Operations

Kendall McEachern

Co-Founder

Kendall was a fundamental part of Acentria Insurance. As a co-founder, he brought more than 30 years of industry expertise to Acentria, helping transform the organization into a leading insurance provider. Beloved by team members, carrier partners and clients, he oversaw more than 400,000 insured multi-family units with property values greater than $22 billion, and over four million square feet of commercial office space and real estate buildings. Kendall has received numerous industry awards to include being recognized as a National Top Producer and Agent of the Year by both Insurance Business America and Insurance Journal. Away from the office, he served as chairman for the American Heart Association, actively participated in his church and golfing, watching sports and spending time with his family. Kendall passed away in January of 2021, leaving a lasting legacy on Acentria’s culture, success, industry-wide reputation – and on all of us fortunate to have worked alongside him.

Mary Lawless

President & Chief Operating Officer

As President and Chief Operating Officer, Mary brings over three decades of industry expertise to Acentria Insurance. With a strong focus on Mergers & Acquisitions, Mary is passionate about partnering with new agencies and leaders to continue the overall upward growth of Acentria. She works in conjunction with the CEO to lead and deliver specialized sales products, services and industry leading capabilities while implementing business and sales strategies to the Acentria sales team and carrier partners. Mary has direct oversight of all operational leaders throughout the entire organizational footprint and is responsible for operational financials and budgets.

She empowers her team members and because of it, is well respected by her peers and those she leads. Since her time with Acentria, Mary’s leadership has contributed to the agency’s exponential growth from 15 to well over 50 locations, increasing employment to over 700 team members, across the southeastern United States. Due to her leadership and contributions to the insurance industry, she has been nationally recognized as one of Insurance Business America magazine’s Elite Women and serves as a valuable member on the Executive Committee for Foundation Risk Partners, Acentria’s parent company. Prior to joining Acentria Insurance, Mary led operations for another national broker. Throughout her tenure, she has held a variety of management positions in Personal Lines, Select Business and Employee Benefits. Mary specializes in agency operations, partnerships and acquisitions and is truly passionate about developing team members to become great leaders.

When not shaping the future industry leaders at Acentria Insurance, Mary enjoys traveling and spending time with her husband, Pat and their family and friends.

Mitch Weinstein

Partner & Co-Founder

As partner of Acentria Insurance, Mitch plays an integral role in mergers & acquisitions. He focuses on seeking out strategic like-minded partners and agencies, across the southeastern United States, to partner and join the Acentria family.

Mitch has over 42 years of business leadership experience that ranges from law enforcement to the finance, healthcare and insurance industries. He was instrumental in developing the nation’s first “at-risk” managed care network for physical and occupational therapy serving the worker’s compensation industry. This network paved the way for a new managed care system, based on incentives.

Mitch is passionate about giving back to the youth of his community. He is an active supporter of the Boys & Girls Clubs of Polk County and believes in helping all young people reach their full potential. He is also the founder of Fallen First Reserve which is a non-profit organization dedicated to financially assisting those family members of First Responders killed in the line of duty and military members killed in action. Mitch also serves on the board for Fund the First.

Kevin Mason

Chief Executive Officer & Co-Founder

As Chief Executive Office of Acentria Insurance, Kevin focuses on developing insurance solutions that strengthen Acentria’s presence in the market and its commitment to client-relationships and exceptional service. With over 35 years of industry experience, he specializes in the overall growth of Acentria is passionate about bringing new talent to the organization both organically and through mergers and acquisitions. Through his leadership and the support of the Executive Leadership team, Acentria Insurance instills a positive corporate culture which has led the agency in being recognized as a leader within our industry as a Top 100 Workplace, Employer of Choice, Best Agency to Work For and several other national and regional accolades.

Before co-founding Acentria Insurance, Kevin served as Branch Manager for another national broker. Kevin holds the prestigious title as an Agent of the Year and five-time National Top Producer. He is also a key member of the Foundation Risk Partners Executive Committee, which is the parent company of Acentria Insurance, while also serving as the National Director for Carrier Relations. In addition, Kevin oversees the Sales Leadership Council, which encompasses sales leaders across the entire FRP footprint in an effort to develop and refine shared resources while offering producer training and development programs.

Kevin received a Bachelor’s Degree in Management from the University of West Florida. He is very active in his community and served over a decade on the Board of Directors of Destin Charity Wine Auction Foundation and remains as a trustee, which funds over 14 children’s charities along the Florida Panhandle. He is also a member of the Destin Chamber of Commerce, Community Association Institute and Florida Association of Insurance Agents. In his spare time, Kevin enjoys golfing, tennis, boating and spending time with his wife Laura, and their children.