In recent years, the landscape of cyber insurance has evolved dramatically, reflecting the changing nature of online risks and threats. One notable trend in this evolution of cyber insurance policy is the increasing prevalence of web tracking claims exclusions, particularly when the insured is found not to be in compliance with those regulatory frameworks governing data collection. We delve into the reasons behind this trend and its implications for insureds seeking cyber insurance.
The Emergence of Web Tracking Exclusions
Web tracking, the practice of monitoring and collecting user data on the internet, has become a cornerstone of digital business models. However, it also presents significant privacy and security risks. The rise in data breaches, along with growing regulatory scrutiny over privacy violations, has led insurers to reassess the risks associated with web tracking. Consequently, many cyber insurance policies now explicitly exclude coverage for claims arising from web tracking activities where the insured is found to not be in full compliance with all regulatory frameworks governing data collection.
What are some web tracking activities?
Web tracking activities, as mentioned in the context of cyber insurance exclusions, refer to a range of techniques used by insureds to monitor and analyze the behavior of users on the internet. These practices are integral to many online business models, especially for advertising and personalized user experiences, but they also raise significant privacy and security concerns. If an insured has any of these items on either their website or in their outreach then they are engaged in web tracking activities and should take note:
Cookies: Cookies are small data files placed on a user's device by a website. They are used to remember user preferences, login details, and browsing history. While they enhance user experience by personalizing content, they also track user behavior across different sites.
Pixel Tags (Web Beacons): These are tiny, invisible images embedded in emails and web pages. When loaded, they send information back to the server, such as whether an email has been opened or a page has been viewed, along with the time and the user's IP address.
Social Media Tracking: Social media platforms track user activities both within and outside their platforms through social media buttons (like "Share on Facebook") and embedded content in other websites.
Analytics Tools: Tools like Google Analytics help website owners understand how visitors interact with their site, providing insights into page views, user flow, and conversion rates. While primarily used for improving website functionality, they also track user behavior.
Email Tracking: Businesses often track emails by embedding tracking pixels that notify them when the email is opened, the time it was opened, and sometimes the location or the device used.
Cross-Device Tracking: This involves tracking a user’s activities across multiple devices, such as smartphones, tablets, and computers, to create a comprehensive profile of their online behavior.
Drivers of the Trend
In recent years, there have been a number of large disputes related to data collection practices. Meta was sued for allegedly collecting healthcare data, potentially violating HIPAA laws. Another lawsuit targeted Oracle, a registered data broker, accusing the company of tracking and monitoring over 4.5 billion people without proper user consent. The tracking allegedly encompasses various user data from web forms, visited URLs, webpage titles, keywords, and timestamps.
Session recording software is also under scrutiny in lawsuits filed in Pennsylvania, California, and Washington. Companies deploying these tools, widely used without full understanding, are facing allegations of recording sensitive user information without explicit consent, violating wiretapping and privacy laws. In the event that the insured is found to be in violation, their claims may be denied under the web tracking exclusion.
Principally, the regulatory landscape, especially with the introduction of stringent data protection laws like the General Data Protection Regulation (GDPR) in the European Union and the California Consumer Privacy Act (CCPA) in the United States, continues to become more complex, making it increasingly difficult for insureds to know with certainty that they are fully compliant with the regulation.
Implications for the Insured
In the event of a claim, carriers will likely review more carefully the practices of their insured to confirm “to-the-letter” compliance with all applicable regulatory frameworks. If the insured is found to not be in compliance then they may also be on the hook for the full cost of the claim, as well as all civil and criminal penalties. Here are a couple of considerations for the insured in this harrowing situation:
- Increased Liability Exposure: With exclusions in place, businesses are more exposed to the financial repercussions of privacy violations and data breaches related to web tracking. This increased exposure can lead to substantial financial losses, particularly in the event of regulatory fines or litigation.
- Need for Robust Data Practices: Insureds must strengthen their data handling and privacy practices to mitigate the risks associated with web tracking. Insureds must implement strict data security measures, ensuring compliance with privacy laws, and adopting transparent data collection policies.
- Increased Focus on Compliance and Training: Companies will need to invest more in compliance efforts and employee training to navigate the complexities of data privacy regulations. Understanding the legal nuances of web tracking and ensuring adherence to these laws becomes paramount.
The trend of excluding web tracking from cyber insurance coverage reflects a broader shift in the industry towards a more nuanced understanding of digital risks. While this trend poses challenges for businesses reliant on digital data, it also presents an opportunity to foster a culture of robust data security and adherence to regulatory frameworks. In the long run, these practices not only mitigate risks but also build consumer trust and enhance the company's reputation.
The Role of Cyber Insurance Specialists
Given these complexities, cyber insurance necessitates a collaborative effort involving insurance specialists, underwriters, risk managers, and IT professionals. Risk assessments must be thorough, considering not only direct risks to the business's network but also indirect risks through third parties and supply chains.
It is equally essential to underscore the significance of having knowledgeable professionals who understand the evolving cyber threats and can adeptly navigate the complexities of insurance policies. Cyber insurance specialists, like those at Limit, play a pivotal role in ensuring that businesses are adequately protected in the digital realm. Beyond just risk assessments, these specialists possess a deep understanding of the dynamic and ever-changing nature of cyber threats. They stay abreast of the latest trends, emerging vulnerabilities, and evolving regulatory landscapes, allowing them to tailor insurance solutions for your business.
Cyber insurance specialists are instrumental in guiding businesses through the intricate process of policy selection, helping them understand the nuances of coverage, limitations, and potential gaps.
The Limit Perspective
Limit is a digitally-native wholesale insurance broker working on behalf of retailers in multiple lines of insurance and across the United States. Limit works on your behalf to find the right policy based on your insured’s exposure to cyber risk. We can work with insurance providers to help customize cyber policies to fit your needs and the market. Customizable options may include endorsements to extend coverage for certain scenarios or exclude specific elements that are either too risky to cover or already covered under other policies.
Our platform allows you to:
- Obtain instant quotes from cyber carriers
- Find up to $3M in Insurance coverage automatically
- Receive a plan with customizable and comprehensive coverage
- Access 24/7 support
Limit is building a lean, tech-enabled business that can efficiently deliver insurance policies which are tailored to the needs of individual clients. We have taken some of the first steps to revolutionizing the industry and welcome you to learn more on our website: www.limit.com
Please reach out and connect with us and our representatives on LinkedIn as well.