Cloud Computing and Cyber Coverage
One of the main reasons commercial insureds do not buy cyber coverage is because they think they have absolute, complete coverage because they're in "The Cloud." I'm going to have some fun at their expense while attempting to help agents break their clients' absolutely, 100% wrong conclusion.
First of all, what is "The Cloud?" It is not that pretty little picture of an innocuous little cumulus cloud that is in all the "cloud" advertising graphics. That may come as a surprise to some agents too. One of the key reasons insureds don’t buy cyber when using the cloud is because a huge proportion of agents have absolutely no idea what "The Cloud" is either. They have that pretty little iconic picture in their own mind.
Using "The Cloud" is nothing more than using someone else's network of computers that are supposed to be cheaper and more reliable and when something breaks, because the services are shared, usually the backup works immediately, but not always.
The security of "The Cloud" may or may not be better than what one might possess individually. Just as an FYI though, you might should consider choosing a cloud provider that has backup in multiple U.S. power grids. The best cloud services understand the importance of this point. Some of the less expensive ones might not.
Second, and to the heart of this is that even if one assumes, even if one is correct that "The Cloud" is safer, what almost every agent and it seems every client of every agent is clueless about is how "The Cloud" has split cyber exposures creating a whole new kind of cyber exposure. This is a nefarious exposure, one in which people are going to get burned. This is the contractual cyber exposure. People are signing cloud contracts without reading them and therefore not understanding they often accept responsibility for Fortune 100 companies' cyber exposures!
That is correct. Not only do you still have your cyber exposure but you're now on the hook for a Fortune 100 company's cyber exposures! How safe is "The Cloud" now? Is it more like an angry God sending lightning bolts down your throat? I'm being melodramatic but my point is real.
For example, here are some excerpts from "The Cloud" contract of a major cloud provider:
12. Warranties. ABC CLOUD PROVIDER, AND OUR AFFILIATES, RESELLERS, DISTRIBUTORS, AND VENDORS, MAKE NO WARRANTIES, EXPRESS OR IMPLIED, GUARANTEES OR CONDITIONS WITH RESPECT TO YOUR USE OF THE SERVICES. YOU UNDERSTAND THAT USE OF THE SERVICES IS AT YOUR OWN RISK AND THAT WE PROVIDE THE SERVICES ON AN "AS IS" BASIS "WITH ALL FAULTS" AND "AS AVAILABLE." YOU BEAR THE ENTIRE RISK OF USING THE SERVICES. ABC CLOUD PROVIDER DOESN'T GUARANTEE THE ACCURACY OR TIMELINESS OF THE SERVICES. TO THE EXTENT PERMITTED UNDER YOUR LOCAL LAW, WE EXCLUDE ANY IMPLIED WARRANTIES, INCLUDING FOR MERCHANTABILITY, SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR PURPOSE, WORKMANLIKE EFFORT, AND NON-INFRINGEMENT. YOU MAY HAVE CERTAIN RIGHTS UNDER YOUR LOCAL LAW. NOTHING IN THESE TERMS IS INTENDED TO AFFECT THOSE RIGHTS, IF THEY ARE APPLICABLE. YOU ACKNOWLEDGE THAT COMPUTER AND TELECOMMUNICATIONS SYSTEMS ARE NOT FAULT-FREE AND OCCASIONAL PERIODS OF DOWNTIME OCCUR. WE DO NOT GUARANTEE THE SERVICES WILL BE UNINTERRUPTED, TIMELY, SECURE, OR ERROR-FREE OR THAT CONTENT LOSS WON'T OCCUR, NOR DO WE GUARANTEE ANY CONNECTION TO OR TRANSMISSION FROM THE COMPUTER NETWORKS.
13. Limitation of Liability. If you have any basis for recovering damages (including breach of these Terms), you agree that your exclusive remedy is to recover, from ABC Cloud Provider or any affiliates, resellers, distributors, Third-Party Apps and Services providers, and vendors, direct damages up to an amount equal to your Services fee for the month during which the loss or breach occurred (or up to $10.00 if the Services are free). You can't recover any other damages or losses, including direct, consequential, lost profits, special, indirect, incidental, or punitive. These limitations and exclusions apply even if this remedy doesn't fully compensate you for any losses or fails of its essential purpose or if we knew or should have known about the possibility of the damages. To the maximum extent permitted by law, these limitations and exclusions apply to anything or any claims related to these Terms, the Services, or the software related to the Services.
How then, can any sane person conclude that if they are using "The Cloud" that their cloud provider is going to provide all the cyber protection they need? In fact, they need more cyber protection using the cloud because of the way the contract reads!
Getting insureds to read their cloud contracts is often an impossibility though for several reasons. First, who wants to read such a dense document? Second, who wants to read such a document only to learn they have more exposures? Ignorance is truly bliss. Let's stay ignorant and enjoy bliss while it lasts.
So, if you as a producer push too hard telling them to read the contract, the odds of making a sale decrease because you are destroying their bliss. Don't be a bliss destroyer.
Instead, offer to read their contracts for them and then, walk them through a contract that increases their risk of loss by asking question, after question, after question. DO NOT TELL THEM ANYTHING! They must conclude on their own they need cyber.
The only conclusive statement you can make is to say, "I can help. Would you like my help minimizing your exposure to uncovered cyber related events?"
Willful denial is one of the most intransigent psychological features of the human brain. Considerable research over the last ten years has been developed that when someone wants to believe something, something that may be totally wrong, that no statements work to change their minds. Interestingly, the more facts one presents, regardless of the situation whether it be political, or vaccines or cyber, the more people believe in the myth. In other words, if you present a fact, they will believe in the myth even more. They will deny reality harder.
To make sales in these situations then, barring them facing the harsh reality of a bad cyber claim resulting in their reality check, one can only ask questions. You can't even tell stories in situations like this because those stories are only apply to others, never, ever them. Questions are the only wedge to their rational brains that will work. Questions are the only way to hit the constructive emotional buttons. Everything else will hit the denial emotional buttons.
If you want to learn more about actual cyber coverages and how to communicate with your clients, let me know. I have a world class cyber education program.
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand Insurance Education, Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.