What's Happening?
A report from KYND reveals that small and medium-sized businesses (SMBs) are increasingly vulnerable to privacy litigation due to common website tracking practices. The report indicates that privacy lawsuits have surged to over 2,000 annually, driven
by digital wiretapping and website tracking technologies that can identify users without their consent. These practices are prevalent among SMBs, which often use third-party tools for analytics and marketing. The report suggests that these privacy claims, while typically low-severity, can accumulate into significant losses for insurers, as they are scalable and often hidden. KYND's research found that 18% of North American organizations had tracking technologies operating without visible user consent, with a higher percentage among SMBs.
Why It's Important?
The rise in privacy litigation poses a significant challenge for SMBs and insurers alike. For SMBs, the use of common website configurations and third-party tools increases their exposure to legal claims, potentially leading to financial losses and reputational damage. Insurers face the challenge of adjusting their coverage to account for these scalable risks, which can accumulate across portfolios. The report underscores the need for SMBs to enhance their compliance efforts and for insurers to develop strategies to manage these emerging risks effectively. The growing use of legal frameworks by plaintiffs' attorneys to bring claims at scale further complicates the landscape, highlighting the importance of visibility and risk differentiation.
What's Next?
As privacy litigation continues to rise, SMBs may need to reassess their website tracking practices and invest in compliance measures to mitigate legal risks. Insurers might consider reevaluating their privacy coverage within cyber policies to address the evolving regulatory environment. The report suggests that using data for underwriting and portfolio monitoring can help identify exposures earlier, allowing insurers to differentiate risk more effectively and avoid unwanted accumulation. The ongoing shift towards claims driven by everyday website behavior may prompt further regulatory changes and industry adaptations.
