Cyber Risk

Companies Ill-Prepared to Deal With Cyber Attacks

Companies plan to boost spending on cyber security to deal with an onslaught of cyber attacks.
By: | February 22, 2017 • 4 min read

Despite a barrage of cyber attacks on businesses in the U.S. and abroad – with American firms targeted most often – more than half are ill-prepared to deal with the threat, according to a survey by specialist insurer Hiscox.

Cyber crime costs the global economy more than $450 billion in 2016, Hiscox said. Losses included business interruption and reputational damage to brand.

The findings show 72 percent of U.S. firms with 250 or more employees, and 68 percent of smaller American companies experienced a cyber incident within the past year.

Nearly half of the U.S. firms (47 percent) reported two or more incidents during the last year.

U.S. firms suffered the most serious and costly attacks even though nearly half of those businesses were ranked as “experts” by the survey in dealing with cyber threats.

Martin J. Frappolli, senior director of knowledge resources, The Institutes

Martin J. Frappolli, senior director of knowledge resources for The Institutes/Risk and Insurance Knowledge Group, said many organizations don’t fully recognize that “first party risks are just as big as third party risks and more commonly sources of lost revenue.”

“The biggest risk of cyber breach is the continuity of the business,” he said. Depending on the length of the business disruption, the loss of revenue, he said, could be financially devastating.

Another matter to keep in mind, Frappolli said, is the increased data sharing between firms, vendors and business partners. “The chain is only as strong as its weakest link.”

In the “Hiscox Cyber Readiness Report 2017,” U.S. firms reported their top cyber security challenges were the changing nature of threats, both internal and external.

To deal with them, 63 percent plan to increase spending on cyber security over the next year with the most money invested in technology, followed by training, cyber security, security staffing, other measures and outsourcing. Many plan to buy cyber insurance.

Technology is the top investment despite being the area where most firms appear to be best prepared.

“This isn’t necessarily about throwing money at technology. It’s about having a well-rounded strategy, process and resources,” said Dan Burke, vice president and cyber product head at Hiscox USA. “This is a human problem as much as it is a technology problem.”

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Training employees to recognize potential threats, such as phishing scams in emails, and having strong password management can go a long way toward cyber security, he said. Seven out of 10 respondents say training has reduced the number of business disruptions.

Emily Cummins, a member of the board of directors of RIMS, the Risk Management Society, and managing director of tax and risk management at the National Rifle Association, is a strong proponent of employee cyber risk training.

Emily Cummins, director of tax and risk management, National Rifle Association

“The No. 1 recommendation is always continuous training,” she said. “And that means year-round reinforcement because employees are a source of unintentional errors and training can prevent [breaches].”

Cummins said training done in collaboration with departments, divisions or teams and including top management presents a powerful message to employees that prevention is critical to the organization. She also recommends devising a breach, or disaster response plan and practicing it regularly.

Most survey respondents listed cyber insurance as a key priority, with 57 percent saying they intend to purchase or enhance cyber insurance coverage this year.

More U.S. firms (55 percent) have cyber insurance policies than companies in the U.K. (36 percent) and Germany (30 percent). Another 25 percent of U.S. firms said they plan to take out a policy this year.

Frappolli said a firm’s risk manager, or a good insurance broker, can help determine which type of policy is best, since there is no standard product. Choices include cyber liability policies, business interruption policies, first party coverages, and endorsements or riders to existing policies.

He advised firms to purchase insurance to fill in the gaps not covered by training and technology and to have a breach plan in place in the event a hack occurs.

“Use the whole toolbox,” Frappolli said. “Don’t just think ‘I want to buy insurance’ and I’m done.”

Released in February, “The Hiscox Cyber Readiness Report 2017” details the results of a survey of 3,000 firms according to their cyber readiness in four key areas — strategy, resourcing, technology and process — and ranks them from novice to expert. It includes their plans to combat the threat going forward and offers advice on how to best prevent and manage it.

Conducted by Forrester Consulting on behalf of Hiscox, the survey, taken in late 2016, questioned executives, managers and IT specialists in charge of cyber security at 1,000 companies of all sizes each from U.S., Germany and the U.K.

Jodi Spiegel Arthur is a long-time journalist. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]