Study: Many Lack Insurance For Cyber Risks

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Michael Ha

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NU Online News Service, May 6, 4:29 p.m. EDTAn insurance companystudy has found that one-third of small- and mid-sized businessessurveyed have experienced at least one cyber-virus attack in thelast three years, but the majority still don't carry coverage forInternet-related exposures.

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The Hartford, in Hartford, Conn., found in its study that suchvirus attacks top the list of computer-related concerns amongsmall- and mid-sized businesses that have fewer than 500employees.

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In a survey of 225 U.S. companies, the researchers found that 90percent of the participants are concerned about computer-relatedincidents affecting their operations. Some 65 percent said they areworried about virus attacks, while nearly 40 percent said they areconcerned about breaches to network security and 30 percent voicedconcerns about Web site security.

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“The awareness has increased over time–this is the second surveywe conducted in the past couple of years. More and more people seemto be aware of their potential exposures,” said Toby Levy, industryprogram manager at The Hartford.

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One common misconception that some companies still have, though,is that if they are not conducting e-commerce, they don't have toworry about the cyber-risk issue. “But all companies are dependenton technology and the Internet to some extent and they haveexposures they should consider,” Mr. Levy told NationalUnderwriter.

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Just in the past couple of years, there have been a number ofdisruptive viruses unleashed into corporate systems, and some ofthese viruses, such as the “I Love You” virus, “Code Red” and“Melissa,” were so pervasive it raised the awareness of cyberrisks. “Companies got a glimpse of what could happen,” Mr. Levysaid.

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But the survey found that even those businesses that have theirown Web sites, which could significantly increase their cyberrisks, the majority still do not have Internet-relatedinsurance.

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The survey found that two-thirds of participants have their ownWeb sites, but less than half of them are even aware that there isinsurance to cover Internet-related exposures. And even among thosewho are aware, almost 70 percent didn't carry such insurance.

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Julia Feldman, technology coverage expert with The Hartford,said that any company that uses e-mail is vulnerable to virusattacks, which can interrupt business for days or even weeks.“Unfortunately, many business owners mistakenly believe if theydon't have a Web site, they don't need to think aboutInternet-related exposures,” Ms. Feldman said.

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Furthermore, there are other Internet-relates risks thatcompanies should also keep in mind. For example, a small servicecompany with an informational Web site may not be aware thatposting articles written by outside sources can create liabilityexposures related to copyright infringement, Ms. Feldmanadvised.

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Also, collecting credit card information through a company's Website can create liability exposures related to customer privacy,she added, so it's important to have the proper firewalls andsecurity software in place.

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And small- and mid-sized companies that want insurance for cyberrisks will have to do their homework to find appropriate coverage.“Most of the products that are out there are designed towardFortune 500 companies or E-bays of the world that are 100 percentdependent on the Internet,” Mr. Levy noted.

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NU Online News Service 5/6/2003

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