From streaming services and interactive platforms to ecommerce and virtual reality experiences, the adult industry has long stood at the forefront of online innovation. However, the same technology-forward approach that has enabled adult businesses to deliver unique and personalized content to consumers worldwide also exposes them to myriad risks. With threats escalating in frequency and sophistication, adult companies should seriously consider safeguarding their assets, reputation and future growth by obtaining cyber insurance.
What Is Cyber Insurance?
By investing in cyber insurance, adult businesses not only safeguard their assets but also demonstrate a commitment to protecting their customers and maintaining trust in a digital world fraught with uncertainty.
Cyber insurance, also known as cyber liability insurance, helps businesses mitigate risk exposure by offsetting costs involved with recovery after a cyber-related security breach or similar event. Policies typically cover expenses related to first-party losses as well as third-party claims, which may include:
- Data breach response: Costs for notifying customers, credit monitoring services, and public relations efforts.
- Legal fees and expenses: Defense costs in the event of lawsuits or regulatory investigations.
- Business interruption losses: Reimbursement for lost income due to downtime or operational disruption.
- Cyber extortion: Coverage for ransom payments and associated costs in ransomware attacks.
- Forensic investigation: Expenses for determining the cause and extent of a cyber incident.
How Cyber Insurance Protects Adult Businesses
The adult industry’s innovation and success also places us in the crosshairs of cybercriminals eager to exploit vulnerabilities for financial gain or simply out of malicious intent. Factors that pose unique cybersecurity challenges for adult businesses include:
High-value data: Adult businesses handle sensitive personal and financial information, including customer identities, payment details and confidential content. This data is highly valuable on the black market, making these businesses prime targets for data breaches. Data breaches can be exorbitantly expensive. According to a 2023 report by IBM Security, the average cost of a data breach globally is $4.24 million. For adult businesses, the costs can be even higher due to the sensitive nature of the data involved. Cyber insurance provides a financial safety net, covering immediate response costs and mitigating long-term financial impacts.
Complex regulatory environment: The adult industry operates under a complicated and shifting web of regulations that vary by region, including strict age verification laws and content restrictions. Noncompliance, whether accidental or due to a cyberattack, can result in hefty fines and legal actions. Cyber insurance can help by covering fines and penalties — where insurable by law — and providing access to legal expertise. Policies often include risk assessment services that help businesses identify and address compliance gaps proactively.
Rapidly evolving technology: Those of you old enough to remember the video format wars will recall that the adult industry was a key player in the battles between Betamax and VHS, and later between HD DVDs and Blu-rays. Adult businesses’ consistent positioning at the forefront of technological innovation has enabled the sector to thrive — but as we adopt cutting-edge tech like virtual reality and artificial intelligence, cybercriminals continually evolve their tactics, exploiting unpatched systems, zero-day vulnerabilities and insecure APIs. A comprehensive cyber insurance policy is designed to adapt to new forms of cybercrime, ensuring that businesses are protected against the latest threats.
In addition, adult companies face most of the same dangers as businesses in any other industry. For instance, cyber incidents can damage a brand’s reputation, leading to loss of consumer trust and long-term revenue. In the event of a cyber incident, timely and effective communication is crucial to maintain customer trust. Cyber insurance policies typically cover public relations consulting fees, helping businesses manage their reputation and control the narrative during a crisis.
Insurers also often provide access to a network of cybersecurity professionals, including forensic analysts, legal experts and crisis managers. This support is invaluable in responding to incidents swiftly and effectively, minimizing damage. Plus, many cyber insurance providers offer risk management resources, including employee training, security assessments, and recommendations for improving cybersecurity posture. These proactive measures reduce the likelihood of an incident occurring in the first place.
Potential Real-World Scenarios
Here are a couple of examples of how cyber insurance can prove crucial in specific situations:
- An adult streaming platform suffers a significant data breach where hackers access user accounts, including personal details and viewing histories. The incident leads to a class-action lawsuit, regulatory fines and a substantial loss of subscribers. With cyber insurance in place, however, the company is able to cover legal expenses and fines, and implement a robust response strategy to rebuild customer trust.
- An adult product retailer faces a ransomware attack that encrypts its sales databases, halting all online transactions. The attackers demand a hefty ransom in cryptocurrency. Fortunately, the retailer’s cyber insurance policy covers the ransom payment — after consultation with law enforcement — as well as forensic investigation costs and business interruption losses, allowing the company to resume operations with minimal financial strain.
Choosing the Right Cyber Insurance Policy
Some things to consider when selecting an appropriate cyber insurance policy:
- Specific risks: Understand and assess the unique risks your business faces. Consider factors like the type of data you handle, your technology infrastructure and potential vulnerabilities.
- Policy coverage details: Scrutinize what is covered under the policy. Make sure it includes both first-party and third-party coverage, and check for any exclusions that might leave you exposed.
- Reputation and expertise: Choose an insurer with a strong reputation in the cyber insurance market and, if possible, experience in the adult industry.
- Customization and scalability: The policy should be customizable to your business needs and scalable as your company grows or changes.
- Legal and regulatory compliance support: Given the regulatory complexities, having a policy that includes legal support can be highly beneficial.
Of course, cyber insurance does not replace robust cybersecurity practices such as regular security audits to identify vulnerabilities, employee training on how to recognize potential threats, strong data encryption methods, strict access controls and authentication measures, and having a comprehensive incident response plan. Cyber insurance should complement and serve as a backup to those measures, one critical component in a comprehensive risk management strategy.
In a landscape where a single cyber incident can have devastating consequences, proactive measures are indispensable. Adult businesses should consult with insurance professionals to tailor policies that align with their specific needs, ensuring they are well-equipped to face the challenges of today’s cyber threat environment. By investing in cyber insurance, adult businesses not only safeguard their assets but also demonstrate a commitment to protecting their customers and maintaining trust in a digital world fraught with uncertainty.
This article does not constitute legal advice and is provided for your information only and should not be relied upon in lieu of consultation with legal advisors in your own jurisdiction. It may not be current as the laws in this area change frequently. Transmission of the information contained in this article is not intended to create, and the receipt does not constitute, an attorney-client relationship between sender and receiver.
Corey D. Silverstein is the managing and founding member of Silverstein Legal. His practice focuses on representing all areas of the adult industry and his clientele includes hosting companies, affiliate programs, content producers, processors, designers, developers, operators and more. He is licensed in numerous jurisdictions including Michigan, Arizona, the District of Columbia, Georgia and New York. Contact him at MyAdultAttorney.com, corey@myadultattorney.com and (248) 290-0655.
