Why Clients Should Ensure Their Solicitors Have Cyber Insurance

 

In today's digital age, the legal profession is becoming increasingly reliant on technology. 

This is especially true for conveyancers who handle sensitive client information and large financial transactions. 

While professional indemnity insurance (PII) has long been a staple in the industry, there is growing recognition of the importance of cyber insurance as well.

 

Professional Indemnity Insurance is designed to protect businesses from claims made by clients for inadequate advice or services. 

 

 

For conveyancers, PII covers instances where a client suffers a financial loss due to errors or omissions in the legal service provided.

 

On the other hand, cyber insurance is a separate policy that covers losses resulting from cyber-attacks or IT problems. This includes data breaches, ransomware attacks, business interruption, and even reputational damage.

 

The Solicitors Regulation Authority revised its minimum terms and conditions for PII in 2021 to explicitly exclude first-party losses due to cyber-attacks or IT issues. This means that if a firm suffers a cyber-attack that results in financial loss, this would not be covered under their PII.

 

Conveyancers handle large sums of money and sensitive client data, making them prime targets for cyber criminals. In fact, the legal sector has seen a rise in cybercrime incidents, particularly in the post-pandemic era where much of the work is conducted online.

 

Moreover, the repercussions of a cyber-attack can be far-reaching. Beyond the immediate financial loss, firms could also face regulatory fines, reputational damage, and the costs associated with rectifying the breach.

 

Despite the clear risks, many conveyancing firms are without cyber insurance. More than seven out of ten law firms do not have cyber insurance, leaving them exposed to potentially significant losses in the event of a cyber attack^.

 

This lack of coverage is concerning given the rise in cybercrime incidents and the potential impact on firms and their clients.

 

From a client's perspective, it is crucial to ensure that their solicitors have cyber insurance for several reasons:

Protection of Sensitive Data: Solicitors handle sensitive information, including personal and financial data. In the event of a cyberattack, this data could be compromised, leading to financial loss and identity theft. Cyber insurance ensures that the law firm can respond effectively, minimising damage to its clients.

Financial Security: If a cyber breach occurs, the costs associated with data recovery, business interruption, legal fees, and public relations can be substantial. A law firm with cyber insurance can weather these costs without passing them on to their clients. 

Risk Management: By having cyber insurance, law firms demonstrate a proactive approach to managing cyber risks. This provides reassurance to clients that their solicitors are prepared to handle potential cyber incidents.

Trust and Reputation: Clients need to trust their solicitors. Knowing that a law firm has taken steps to protect itself from cyber threats, including having cyber insurance, can enhance that trust and the firm's reputation.

Compliance with Regulatory Requirements: There may be regulatory requirements necessitating law firms to have certain protections in place. Compliance with these requirements is often in the best interest of clients. 

 

Therefore, before engaging with a solicitor, it's essential for clients to check whether the firm has cyber insurance. It serves as an indicator of the firm's commitment to protecting client data and can provide peace of mind in an increasingly digital world

 

Its clear that PII alone is no longer sufficient. Cyber insurance should be seen as an essential part of a firm's risk management strategy, providing critical protection against the evolving landscape of cyber risks.

 

The Law Society recommends that firms consider purchasing cyber insurance even though recently published research by the SRA and LAB suggests that firms with separate cyber insurance are paying more for PII than those who do not have it.    It It seems some insurers deem the existence of such cover as an indicator of high risk. 

 

While the cost of cyber insurance can be a concern, it pales in comparison to the potential losses from a cyber attack. As the old saying goes, "it's better to be safe than sorry."