Digital manufacturing has become more advanced, creating a movement called Industry 4.0. (Photo: Shutterstock) Digital manufacturing has become more advanced, creating a movement called Industry 4.0. (Photo: Shutterstock)

Cyberattacks may not be at the top of an agent's list when examining the risks their manufacturing clients face. Instead, agents may gravitate towards traditional risks, such as equipment breakdowns, product recalls and injuries to employees. However, with the manufacturing industry becoming increasingly technology-dependent, it is more important than ever to advise manufacturing clients to consider insurance solutions that could protect them and their companies against cyberattacks.

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Increased connections increase risk

Recently, the U.S. Department of Homeland Security ranked the manufacturing industry second highest for the most documented reports of cyberattacks. Here's why: Digital manufacturing has become more advanced, creating a movement called Industry 4.0. In doing this, manufacturers have been trying to eliminate business network separation by linking digital systems together, gradually filling the "air gaps" that had previously separated industry manufacturing networks from digital business networks and the internet. Although the connections between systems are new, the systems themselves may be old, making companies vulnerable to cyberattacks. 

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What are hackers looking for?

Hackers are more likely to seek manufacturers' trade secrets by stealing their intellectual property and technology than they are to seek their banking information. Manufacturers are vulnerable to certain risks, including malware and ransomware, that could shut down their entire operations, impacting their supply chains and those of business partners and vendors. 

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  • The manufacturing industry had 536 cybersecurity incidents and 71 cyber breaches in 2018, according to the Verizon Data Breach Investigations Report.  
  • The average cost of a data breach for small-to-medium-sized enterprises is estimated to be approximately $117,0003, according to Kaspersky Lab.

This threat reaches far beyond just the factory floor. Hackers recently accessed the computer control modules and critical operating systems of a small number of several popular consumer vehicles. The resulting recall of more than 1.4 million vehicles underscored the importance of broader insurance coverage as it can be difficult to predict the full impact of a hack.

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Coverages to consider

Industry 4.0 creates opportunities for independent agents to talk with their manufacturing clients and get a better understanding of their cyber risks and exposures. Based on those discussions, independent agents can provide guidance on appropriate coverages such as:

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  • Data breach coverage to help cover the cost of legal and forensic consulting services, ransom and reward payments, public relations services and lost cyber business income from a cyberattack. 
  • Manufacturers' errors and omissions coverage to help protect against financial losses from lawsuits and other consequences that may arise from allegations that services or products do not perform as expected. 
  • Cloud computing service interruption coverage to cover costs for data repair and restoration services, data research, lost business income and extra expense when a cloud service provider has an outage resulting from an equipment breakdown. 
  • Data restoration coverage to provide coverage for data loss due to service interruption, such as a loss of electrical power.
  • E-commerce coverage to help cover the cost of damage caused by hackers or malware to hardware, software and data.
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Future evolution

Industry experts expect to see increased digitalization and full adoption of Industry 4.0. As manufacturing clients increase the scope of their networks and modernize their operations, independent agents can play an important role in guiding these clients to coverages that can help protect them and to reduce their risk.

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