Business Services by Joan Engebretson, Contributing Writer INSURANCE Size Up Your Cyber Risk
As security dealers become increasingly reliant on the Internet, they also have exposed themselves to new business risks, many of which are not covered by tra- ditional insurance policies. As owner of Michael J. Kelly Insurance Agency, Mike Kelly has provided insurance policies for years that are tailored for the needs of the security industry. He talked to SDM recently about cyber security risks and what dealers need to do to protect them- selves against these risks, including what they need to know about the emerging area of cyber insurance.
SDM: What is causing the need for cyber insurance? Kelly: The cyber threat has been ongoing for the past eight years. Through research and development for our insurance pro- grams, I have found that there is a great degree of non-coverage in current liabil- ity insurance policies, criminal insurance policies and property policies that need to be extended to the security industry. Because the insurance industry is not quick to change, I saw that the lack of cov- erage needed to be addressed three years ago and started working on a completely new product called the cyber insurance program. It’s made to address specifically the alarm security industry and it covers cyber liabilities, cyber property damages, media liability and loss of income from network failure. It is unusual in that any one insurance policy normally doesn’t cover all of those different aspects.
SDM: Let’s go over each of those four items you mentioned, starting with cyber liability. Kelly: Cyber liability is a new threat. It’s identity theft. Today there are probably 100 requirements, federal and state, to report an identity theft breach from your
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computer system or you will be subject to thousands of dollars of fines. And there is more federal regulation coming. These requirements need your insurance to do two things — protect you from dam- age if information is stolen from your com- puter system and provide funds to report breaches to thousands of alarm customers
once again is not addressed by a general liability policy.
SDM: The fourth type of coverage was loss of income. Where does that come in? Kelly: A cyber attack could be ongoing and would take out the ability of the alarm industry to monitor accounts. Replacing income and assets from a cyber attack requires act of terrorism insurance. And the same issues could occur with a non- terrorist attack. You need special coverage.
Replacing income and assets from a cyber attack requires act-of-terrorism insurance.
and provide them with credit reports at your cost to show your good will. Under the liability area you also have denial of service liability. If you do internet protocol (IP) monitoring, a virus over the network could infect your central station computer system and disable it. Terrorism is a separate part of most insurance poli- cies, but we’ve included it in our program.
SDM: What about cyber property damage? Kelly: A cyber attack can threaten replace- ment of computers on the office network as well as in the central station. But dam- age from an electronic data virus attack is a separate cause of property loss that is not included in most property policies.
SDM: What is media liability? Kelly:We have e-mails and websites that can contain slander, defamation of char- acter and copyright or logo infringement that are liabilities under an electronic data format that are not addressed by a gen- eral liability policy. And there are court cases on the books that have lawsuits filed against people who use websites to pass on information to clients that have infected clients’ computers. This liability
SDM: Can security dealers customize their cyber insurance based on their own unique needs? Kelly: They have first-party and third- party exposures. First-party exposures are the assets of the alarm dealer and loss of income. These risks need to be analyzed to come up with their values and then to decide what limit you want to insure those values for and what deduct- ibles you want to use. Third-party cover- age is for threats or liabilities you take on worldwide if you were attacked. This would include viruses that were unknow- ingly sent to your computer that could damage others. Identity theft liability is included here as well as media liability.
SDM: Do you expect other insurance companies to begin offering cyber insurance programs for security deal- ers and/or will general liability policies be expanded to cover cyber security? Kelly: I expect others to develop products over the next three to five years. In time, gen- eral liability will be expanded but the insur- ance industry is struggling with this because current rules were never developed for the electronic data age and for the first time these risks apply to worldwide exposure.
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