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Technology and Cyber Risks
- e-Professionals - Traditional Professions On the Net
- Information Technology Professionals
- e-Commerce
- Internet Advertisers
- Directors & Officers Coverage
- Identity Theft Insurance
- Hacker Insurance
The Internet is synonymous with change, and has in fact defined change in our society today. "Net speed" is used to describe faster than fast; Bill Gates book is called Business at the Speed of Thought. Virtually all businesses are working hard to determine how to harness the power of the Internet. And the change is just starting. This is an exciting time to be in business, and in the insurance business.
The insurance business is addressing the impact of the Internet on many fronts, and having to do it at a speed to which it is not accustomed. The ability of underwriters in the specialty lines market segment to respond quickly with advanced coverage is impressive given the constant change in the Internet world. In this section of our website we will introduce the current state of e-commerce and Internet insurance.
Insurance coverage for Cyber Risks is a significant and growing concern among insurance buyers. A Lloyds of London study found that 62% of executive respondents ranked e-commerce risks as significant, second only to D&O claims. When asked about lack of insurance, e-commerce was ranked of highest concern. And underwriters report that Cyber Risk insurance, while still in the early development stages, is gaining greater acceptance.
Cyber Risk, frequently referred to as "Cyber Liability", refers to a range of coverages designed for organizations involved in e-commerce and the Internet. The frequently used name, Cyber Liability, is something of a misnomer because some of the exposures and coverage offered are first party, not third party. Coverage and terms vary dramatically in this new and rapidly changing market segment depending upon the industry sector and market providing the coverage. We have tried to segment the business into types of organizations needing specific coverages. These are noted below.
Cyber Risk insurance is designed for the following sectors of the e-commerce and Internet world:
- e-Professionals - providing traditional professional services over the internet
- Information Technology (Internet) Professionals - website developers, systems/computer consultants, etc
- E-commerce Companies - companies existing only on the net and "clicks & mortar" companies, and content providers such as portals, search engines and specialty providers of content
- Internet Advertisers ("Brochureware") - traditional organizations utilizing the internet for marketing
Each of these sectors has a different set of exposures, although there is significant overlap between them. Some of the primary types of exposures contained in various types of Cyber Risk coverage are discussed below.
Professional liability exposures arise from both traditional professional services provided over the Internet ("e-professionals") and from new Internet-related professional exposures. e-Professionals provide traditional professional services over the internet, such as on-line legal or health-care services. Internet-related professional exposures for Information Technology (Internet) Professionals arise from services provided to clients such as web site development, but can also arise from damage a professional can cause to a client's systems resources. This latter exposure includes virus transmission and loss of data. In addition, professional exposures can extend beyond traditional economic loss to contingent bodily injury or property damage for some professionals.
Media exposures arise from intellectual property, defamation and invasion of privacy claims. The intellectual property exposures, such as copyright or trademark infringement, are an unpredictable and rapidly evolving area because the law as it applies to the Internet is not clearly defined. For example, no clear definition has been established for standards of copyright infringement. Does a link from another site to your content infringe on your copyrights? The litigation involving Internet-based music sharing is delving into this new territory.
Security breaches are another area of significant exposure for companies involved with the Internet. The introduction of viruses and unauthorized access are well known examples. Theft of data and extortion are less publicized but equally important exposure areas. Recently, privacy issues related to e-commerce initiatives have gained national prominence, and employee actions have become a significant source of security breaches.
The exposures listed above are not all inclusive, and no policy provides coverage for all the exposures. Cyber Risk is more than liability - it can include property and crime exposures as well. For example, theft of valuable corporate data may involve both first and third party exposures. Theft of product information essential to the business, such as customer lists or product designs, will create a different exposure than theft of clients' personal records.
Some recent examples demonstrate the wide range of technology losses from e-commerce and Internet organizations:
- Denial of service hacking
- User posts libelous material on a bulletin board
- Webmaster uses another site's content in site development
- Theft of client's credit card numbers
- Another party's unauthorized use of your on-line content
- Introduction of a virus into a client's system
- Inadvertent release of client's confidential information
- Theft of product designs
- Extortion
- Web site design that does not function correctly
- Employee makes derogatory comments about a competitor
Do traditional policies cover Cyber Risk? Although overlap does occur, Cyber Risk damages incurred by e-commerce and Internet companies are not typically covered by traditional policies such as general liability (GL) policies. Most GL policies do not cover economic loss and professional services, which precludes most Cyber Risk damages. Property and crime policies are examples of other policies where some Cyber Risk coverage might be found, but coverage is normally limited if available at all.
Strong client contracts are a protection from Cyber Risks. Many Internet professionals have protected themselves through strong contract provisions, but some legal experts do not believe that contract protections are adequate or will even hold up.
Underwriting Cyber Risk is a tricky proposition. Many businesses appear to have limited exposure, and go years with no claims. However, a small error in the software or services provided may have a significant impact on a client, resulting in consequential damages greatly exceeding the value of the contract. See Claim Examples for additional information.
Further complicating the underwriting process is the lack of historical information and the rapidly changing technology. Technology companies are introducing services that were not even contemplated a few years ago. On line banking is but one example.
Cyber Risk coverage is available now for most companies involved in the Internet world, although for more unusual situations customized coverage may need to be developed. Tennant Risk Services Insurance Agency LLC ("Tennant" or "Tennant Risk Services") provides coverage for a wide range of technology and Cyber Risk organizations, including information technology professionals. For assistance with a particular account or coverage situation please contact us at info@tennant.com or see contact information on this website.
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