Growing Cyber Exposure

Like all businesses today, the nonprofit sector is struggling to understand how to handle the growing concern of cyber risk in their organizations.

Cyber and privacy coverage is the new employment practices liability, says Steve Parkhurst, producer for Heffernan Insurance Brokers. While many nonprofits have cyber exposures, a great number continue to go without cyber liability coverage, Parkhurst said. “It’s amazing how many do not have that coverage; it baffles me.”

One of the challenges to selling cyber coverage in the nonprofit sector is often organizations don’t align their operational practices with the exposure, according to Jamie Crystal, executive vice president and third-generation principal of Crystal & Co. based in New York.

“For a lot of our clients, there’s a constant push to generate new funding sources because their funding at the state, federal and local levels have been severely limited or reduced,” he says. “They are going after individual donors in different ways and using social media to do that. That’s really cool, but that now creates cyber liability exposures.”

Similarly not-for-profit organizations might have personally identifiable information such as healthcare records, or Social Security numbers, and have to figure out from a risk management perspective how to manage that exposure, Crystal says.

“Certainly healthcare-related institutions understand that but now educational institutions and social service organizations are starting to ask the questions about their exposures, and a lot more are purchasing privacy liability-related insurance covers,” he says.

Michael Liguzinski, division president, specialty human services, Great American Insurance Group, concurs. He says Great American has seen a definitive increase in the demand for cyber coverage.

“We experienced a three-fold increase in the amount of cyber coverage that we wrote from 2013 to 2014,” Liguzinski said. “Because cyber is a unique coverage, similar to nonprofits, we have a specialty group that focuses in offering this coverage.”