ATLANTIC CITY, N.J.—Cyberspace is the next employment practices liability exposure, a consultant says, noting that threats to agents' personal and customer information are real and almost too numerous to imagine.
According to Steven D. Lyon, a consultant with Lyon Consulting Services in Pequannock, N.J., the cyberspace business exposure will be "the next big deal" in the liability arena.
When thefts of customer information occur, "attorneys will have a field day" if an agent can't prove that he or she protected a client's data or advised clients to purchase cyber protection insurance, he warns.
Lyons, speaking at the annual conference of the Professional Insurance Agents of New York and New Jersey in Atlantic City, N.J., says that no matter how good agents believe their computer security is, they are vulnerable to having information stolen.
Protection of privacy data is imperative, not only from a liability standpoint, but also to avoid damage to the agency's reputation, he says.
To protect themselves, Lyon advises agents to limit the amount of information they collect. "If you don't need it, don't collect it," says Lyon. And "get rid of what you don't need."
To get rid of paper documents, agents should buy micro-cut shredders because identity thieves can paste together shreds from more conventional shredders.
Also, hard drives need to be totally destroyed. Deleting the information doesn't get rid of it from the hard drive. Only the destruction of the hard drive will ensure information can't be stolen.
When it comes to giving out information, confirm who you are giving information out to.
Lyon illustrates this with a personal story. American Express Security called him after a trip asking him if he had made certain charges, he recalls. He had not, and security then went ahead to confirm some information by asking some questions.
He balked at answering when they asked for the security number on the card and told them he would call back.
When he called American Express and explained what had just transpired and wanted to confirm it was American Express, the security official told him they never made the call. They quickly surmised that with all the personal data they had collected on him, the thieves did not have the card's security number and were fishing for it.
Agents, he warned, need to protect themselves, and purchase insurance coverage to fill in the gaps.
Among just a few of the gaps:
• Electronic Data Liability
• Business interruption coverage that not only covers interrupted services, but also covers the investigation for the reason for the loss.
• Loss Event Liability Insurance that covers losses to third parties for e-business losses.
• Public relations coverage to pay for the expenses incurred while the agency rebuilds its reputation.
Offering help to agents, PIA Management Services, which covers New Jersey, New York, Connecticut and New Hampshire members, recently introduced cyber liability protection for agents.
There are two policies. One is underwritten by Philadelphia Insurance Co. and is a stand-alone program. The other is by Utica National Insurance Group and is an optional endorsement to a new or existing policy. That form is still pending approval in New York.
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