GDPR insurance

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Page written by Chris Godfrey. Last reviewed on November 7, 2024. Next review due April 6, 2025.

Under the General Data Protection (GDPR) Act of 2018, organisations that handle customer and private citizen’s data are required to protect that data from interference and illegal exposure. Massive fines and the risk of large compensation claims await businesses that violate the rules.

GDPR insurance is designed to protect businesses against the potentially high costs of data protection infractions, allowing them to operate more confidently within GDPR guidelines.

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What is GDPR insurance?

GDPR insurance is a type of business insurance designed to help organisations manage the financial risks associated with non-compliance of the GDPR Act. This specialist coverage is often bundled into cyber insurance policies, and it typically covers legal costs, fines, and expenses related to data breaches, regulatory investigations, and lawsuits stemming from GDPR violations.

Do I need GDPR insurance?

It depends on the type of business you operate. GDPR insurance is beneficial for any business that handles the personal data of EU citizens, particularly those at higher risk of GDPR non-compliance due to the volume or sensitivity of the data they process.

Specific types of businesses that often need GDPR insurance include:

Tech and ecommerce companies: These firms handle large amounts of personal data, often across borders, increasing GDPR compliance risks.
Financial and healthcare services: These types of business manage highly sensitive information, making them prime targets for data breaches and strict regulations.
Marketing and advertising firms: These organisations process extensive personal data for targeted campaigns, heightening GDPR obligations.
Data processors and cloud providers: Companies storing or managing client data for other organisations may face GDPR exposure from third-party data breaches.
Retailers and hospitality businesses: These businesses often handle and store customer data for transactions, loyalty programs, and reservations, necessitating data protection measures.

Essentially, any business with a significant dependency on personal data—especially if based or operating in the EU—can benefit from GDPR insurance as a safeguard against compliance risks.

What is the penalty for violating GDPR rules?

In the UK, GDPR rules are enforced by the Information Commissioner’s Office (ICO). They have the power to attach financial penalties to businesses that are in breach of GDPR. The penalty you may receive is determined by the severity of your violation, but the maximum your business can be fined is £17.5 million or 4% of your worldwide turnover, whichever is higher.

What is covered with GDPR insurance?

GDPR insurance helps organisations manage the financial and legal impacts of GDPR non-compliance:

Regulatory fines and penalties: Covers fines imposed by data protection authorities for GDPR violations, within legal limits.
Legal defence costs: Pays for legal expenses incurred during regulatory investigations or litigation related to GDPR breaches.
Data breach response costs: Covers expenses for notification, public relations, and crisis management following a data breach affecting personal data.
Compensation claims: Protects against compensation claims filed by individuals whose data rights were violated.
Third-party liabilities: Covers costs if a third party sues due to the company’s GDPR non-compliance impacting them.

What is NOT covered with GDPR insurance?

GDPR insurance generally does not cover:

Criminal fines: Most policies do not cover fines resulting from criminal activities or intentional violations of GDPR.
Intentional non-compliance: If a company knowingly disregards GDPR rules, related costs are typically excluded from coverage.
Pre-existing Incidents: Data breaches or violations that occurred before the policy started are not covered.
Internal security improvement costs: Expenses to upgrade security or compliance processes after an incident are usually excluded.
Reputational damage: While PR costs may be covered, the actual loss of reputation or revenue following a data breach isn’t typically included.
Contractual penalties: Fines or penalties specified in contracts rather than GDPR regulations aren’t usually covered.

Exclusions vary by provider, so businesses need to review policies carefully to understand the limitations.

Is GDPR insurance the same as cyber security insurance?

No, GDPR insurance and cyber insurance are related but distinct. Cyber insurance generally covers a broad range of cyber risks, such as data breaches, network outages, and cyberattacks, and it provides support for expenses like data recovery, legal fees, and business interruption. GDPR insurance, on the other hand, specifically focuses on risks related to non-compliance with the GDPR (see above). Some cyber insurance policies may include GDPR-related coverage, but GDPR insurance is tailored exclusively for GDPR compliance risks.

Is GDPR insurance a legal requirement?

No, the only business insurance that is legally required in the UK is employers’ liability insurance which compensates an organisation’s employees in the event of an accident, illness or work-related injury. Businesses can be fined £2,500 per day for every day they operate without this mandatory cover.

What are the risks of not having GDPR insurance?

As well as the potential for huge fines from the ICO, businesses risk significant financial losses from legal fees, and compensation claims if they breach GDPR. Uninsured companies may face severe financial strain, reputational damage, and operational disruptions, especially after a data breach.

What other types of business insurance do I need?

It isn’t just about the data your business handles. Accidents, errors and omissions can happen at any time and their impact could bring crippling costs to your business, or even cause you to cease trading. To eliminate this kind of worry, businesses will typically take out a range of insurance protections, including:

Public liability insurance

Public liability insurance protects your business if someone is injured, or their property is damaged because of the services that you or your business provides. This type of cover, also known as PL or liability insurance, is designed to protect your business against third-party claims for injuries or property damage from a customer or client, passer-by, or a visitor to your business premises – whether you’re at fault or not.

Professional indemnity insurance

Professional indemnity insurance, also known as professional liability insurance, is an essential type of cover for individuals and businesses that advise clients, help them navigate complex financial or legal affairs, or provide them with vital information that is published in the media. In these kind of cases, errors can cost thousands or even millions in legal compensation claims. Professional indemnity (PI) can protect you if a client makes a financial loss because of your work and then makes claim against you or your business. Trade associations, government bodies, public institutions, and major customers will often require proof of a minimum level of PI insurance before doing business with you.

How Swoop can help

All business involves risk, but that doesn’t mean you have to suffer the consequences if things go wrong. Don’t let a data breach or GDPR violation become a catastrophe for your organisation. Contact Swoop today to compare top-quality GDPR and cyber cover from a range of providers and to discuss all your business insurance needs.

Written by

Chris Godfrey

Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

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