Increased access to the technical tools needed to launch cyberattacks, minimal risk of apprehension and lucrative payouts havecreated a perverse incentive for criminals to embrace crimes thatare cyber-enabled or cyber-dependent.

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The nature of cyber crimes, the motivation behind them, thetargets and the actors are all evolving. The cyber underworld, oncedominated by mischievous computer experts, is now attractingfinancial criminals, hacktivist groups driven by distinct agendasand nation-states—all of which are targeting organizations of alltypes, small and large alike. The motivation for hacking has gonefrom exposing a target’s weaknesses to exposing or stealingsensitive data and disrupting critical business processes.

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At significant cost to corporations and their customers,criminals are netting millions of dollars trading personallyidentifiable information stolen via data breaches or hacking intocorporate networks. Recent industries or sectors that have seen thegreatest increase in exposure and claims include healthcare,financial institutions, retail, IT service firms, social media,payroll processors and government agencies.

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Four common but dangerous cyberattacks face every typeof business—including insurance agents and brokers. Here arereal-life examples of how the right risk management solution canprovide you and your clients with the critical financial protectionneeded.

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[Related: Cyber risk: It’s personal]

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Personal-data-shutterstock_122137594-Maksim Kabakou

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1. Breach exposure

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Issue: A major source of cyber loss continues to arisefrom unauthorized corporate network breaches.

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Example: Exploiting a then-unknown gap in an insured’sIT network, cyber criminals gained access to sensitive customerdata that constituted personally identifiable information (PII) andpersonal health information (PHI). The potential breach requiredthat about 18,000 customers spread across 22 states (all requiringspecific notice parameters) be notified and have their creditmonitored.

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Solution: Because this client had the proper riskmanagement plan in place, the crisis management team was able toquickly notify affected customers and provide credit monitoringservices for a year. Also, because the risk management planincluded cyber/privacy cover, the cost of notification and creditmonitoring—totaling $255,000—was covered after the policy retentionwas met.

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Companies need to first assess their vulnerabilities and thenlook into evaluating the right cyber and privacy liability planbased upon the results of those assessments. Cyber liability isassociated with electronic systems, the Internet, network accessand the network security systems of an organization. Privacyliability is associated with privacy issues, specifically theunauthorized dissemination of information or lack of protection foror release of PII such as credit card information and SocialSecurity numbers.

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Nearly every organization is exposed to cyber and privacyliability, but especially one that does business online, acceptscredit card payments, manages a network, or possesses any form ofPII relating to clients or employees. Short-term cyber or privacycrisis solutions include coverage for notification expenses, creditmonitoring and crisis management. Long-term cyber or privacy crisissolutions include coverage for defense and damages along withbusiness revenue protection.

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Hack-red-letters-gray-computer-keyboard-pichetw

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(Photo: Shutterstock/pichetw)

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2. Hacking Event

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Issue: Hardly a week goes by without news of organizedcriminals accessing systems to inflict financial or reputationaldamage—or both—on organizations.

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Example: A Midwest furniture chain’s computer systemswere attacked by “Backoff”malware, a virus that targets point-of-sale systems usedthroughout the retail industry. The furniture chain had to suspendoperations for four days at five major store locations.Approximately 96 hours was spent on the data recovery efforts,costing the company $19,200. Meanwhile the business lost as aresult of the partial shutdown of the store locations totaled$216,000.

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Solution: As a result of securing the right coverage,the furniture company’s expenses, including business interruption,were covered in full, subject to the policy terms andconditions.

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Businesses should review their existing polices with theiragents and brokers to make sure they have best-in-class cybercoverage for hacking events. The cyber policy should includecoverage for:

  • business Interruption
  • loss of income,
  • data restoration
  • brand/reputational management,
  • defense and
  • damages.

In addition, be sure you understand the clauses relating tocoverage for forensic investigation and legal review in your cyberpolicy.

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Phishing-attack-on-computer-shutterstock_292277384-Phishing-attack-on-computer-shutterstock_292277384-wk1003mike

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(Photo: Shutterstock/wk1003mike)

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3. Social Engineering Exposures

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Issue: Increasingly, social-engineering techniques areused to induce employees to break normal security procedures,leading to a dramatic rise in cyber security incidents andresulting financial losses. Social engineering is a non-technicalmethod of intrusion used by hackers that relies on human mistakes.In many instances, it involves tricking people into breaking normalsecurity procedures, typically using innocuous subject lines fromcontacts or company-generated emails.

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Example: A scammer pretending to be the CEO of afinancial services company emailed the firm’s director of treasuryin an attempt to induce the transfer of money due to an emergency“transactional need.” The scam email claimed the funds were neededto complete an acquisition.

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Solution: Fortunately for the company, a funds-transferprotocol was in place and the CEO was alerted, preventing apotentially costly fraud.

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For this type of threat, it’s important to implementpre-and-post cyber incident best practices, and communicate cyberrisk updates to employees in every area of your company,continually.

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According to a recent cyber risk survey, 48% of large companiesand 32% of companies of all sizes have experienced 25 or moresocial engineering attacks in the past two years. And 30%of all victims of social engineering cite an average per-incidentcost of more than $100,000 to locate, remediate and protect againstfurther losses from a successful social engineering attack.

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Work with your agent or brokerage firm to ensure that your cyberpolicy contemplates Social Engineering attacks, including phishingand unauthorized electronic transfers, for example. In addition,educating your employees is a firm’s single best defense from asocial engineering cyber attack. Ask your agent or broker aboutcyber webinars, training sessions and updates that can make youremployees aware of the latest social engineering exposures seekingto trip them up.

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Young-hacker-in-hoodie-&-sunglasses-with-money-shutterstock_139949650-Andrey Armyagov

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(Photo: Shutterstock/Andrey Armyagov)

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4. Cyber Extortion Risk

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Issue: Cyber extortion, which involves a demand formoney to avoid a cyber attack or release of confidentialinformation, is on the rise. Although cyber breach and hacking arestill the most common types of risks impacting companies today,cyber extortion is the fastest growing cyber threat. Organizationsthat have fallen victim to cyber extortion include Domino’s, Nokiaand Code Spaces, many universities, and several police departmentsacross the country. As a result, companies and organizations arepaying out millions of dollars to cybercriminals for the saferecovery of stolen data or to avoid network harm.

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Example: A manufacturing firm received an email statingthat the functionality of its system was about to be compromisedand unless $250,000 was sent to a particular email address/contactdrop in one week, major parts of the firm’s network would bedestroyed, including proprietary data.

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Solution: Fortunately for the company, a strong cyberand privacy liability program was in place, and the cost of theransom was covered. It’s critical to communicate cyber risk updatesto employees in every aspect of the firm, however, so attacks suchas this one are brought to the attention of management as soon aspossible.

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[Related: Managing manufacturing risk: Cyber enters thepicture]

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It’s no longer a matter of “if” but a question of “when” acompany will be attacked. Therefore, understanding the true breadthof cyber threats and securing risk management solutions thatbackstop your company’s IT and other departments’ risks can providecritical financial protection from a cyber threat that is very realand growing. Your agent and broker can help you from riskassessment, to risk management, assuring the correct coverage foryour organization and ensuring that you have the tools toeffectively manage a cyber incident in case one occurs.

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Paul King is USI’s vice president of management professionalservices (MPS) and is based in USI’s Dallas office. The MPS groupleverages the USI ONE Advantage™ with prospects and clients acrossthe country. USI ONE is a fundamentally different approach to riskmanagement, integrating proprietary business analytics with anetworked team of local and national experts in a team basedconsultative planning process to evaluate the client’s risk profileand identify targeted solutions to address those risks. To learnmore about USI ONE, contact Paul at [email protected] or 214-443-3107.Visit the firm's website for moreinformation.

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