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Insurance Industry News from ProgramBusiness.com

Risky Cyber-Risks
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As companies become more dependent on their computer networks for vital data, business continuity and communications, their vulnerability to cyber catastrophes increases. Unfortunately, most companies are operating in a 21st century threat environment with 20th century insurance coverage. The developments in the field of risk management have changed with technology."



The insurance industry has developed cyber insurance products to help businesses confront the growing number of network security risks that have the potential to shutdown a network, destroy vital data or steal customer information. For example, as the public becomes more concerned about privacy, businesses will become more aware that they are liable if their customers' personal information is compromised. However, only a small number of businesses are reportedly properly insured



According to a recent Ernst & Young survey, only seven percent of respondents knew they had a specific insurance policy geared to this network and cyber-risk. Nearly a third (33 percent) thought they had coverage they actually lacked. Another 34 percent knew they lacked such coverage, while 22 percent didn't know the answer. Ernst & Young characterized the fact that only 7 percent of surveyed companies had cyber insurance as "astonishingly low, given the risk environment and the fact that general policies don't provide such coverage."



Regardless of its product line or service, virtually all major businesses today rely on computer networks to function, but they need to recognize that network security risks are fundamentally different than traditional physical risks like fire. If a hacker or virus shuts down a network or destroys computer software or data, most businesses today have either limited or no coverage. Insurers have excluded these risks from standard commercial policies and are now offering stand alone coverage. Whether your client conducts business over the Internet, stores customer data on servers or simply uses email, it is at risk.



By writing policies for network security exposures, the insurance industry is providing:

(1) Vital risk transfer for network security exposures;

(2) Incentives for network security best practices, including lower insurance premiums; and

(3) Improved cyber-risk management and education.



Coverage_Traditional insurance policies such as standard property and commercial general liability insurance do not adequately deal with the risks of a cyber attack or network security failure.



Specialized cyber-risk coverage is available primarily as a stand-alone policy. Each policy is tailored to the specific needs of a company, including the technology being used and the level of risk involved. Both first- and third-party coverages are available, including:



Loss/Corruption of Data - covers damage to or destruction of valuable information assets as a result of viruses, malicious code and Trojan horses.



Business Interruption - covers loss of business income as a result of an attack on a company's network that limits the ability to conduct business, such as a denial-of-service computer attack. Coverage also includes extra expense, forensic expenses and dependent business interruption.



Liability - covers defense costs, settlements, judgments and, sometimes, punitive damages incurred by a company as a result of:
Breach of privacy due to theft of data (such as credit cards, financial or health related data),
Transmission of a computer virus or other liabilities resulting from a computer attack, which causes financial loss to third parties,
Failure of security which causes network systems to be unavailable to third parties,
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