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Cyber Risk

High Net Worth’s Unique Cyber Challenges

Emerging cyber risk is a challenge for everyone these days, but for high net worth individuals and families, the challenges can be even greater.
By: | September 12, 2017 • 6 min read

High net worth individuals have a bigger attack surface,” said Martin Hartley, executive vice president and chief operating officer of PURE Group of Insurance Companies. “They have more devices, they travel more, they may have domestic staff. There is just a greater attack surface for someone targeting them to get through.”

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Wealth attracts theft, but the lifestyles of the better off make them targets as well. They tend to embrace technology, from computer-enhanced toys to a vast array of smart home devices, most of which are Wi-Fi enabled, presenting opportunities for would-be cyber thieves.

“With all of the smart home technology, [criminals can] hack into your thermostat, which now gives them access to the rest of your network and … the phones, iPads, and computers that family members do their banking on,” said Lisa Lindsay, executive director at the Private Risk Management Association. The latest gadgets or apps may still have unknown bugs or weaknesses, as well.

Domestic staff and frequent entertaining can both lead to sharing passwords, which makes networks less secure.

“Children of the high net worth will have phones earlier,” said Kim Lucarelli, senior vice president and director of personal client management at Oswald Companies. “They may have them at 10, 11 years old.” Children that age are less likely to understand the importance of good cyber hygiene, and more likely to develop bad habits that will be difficult to unlearn when they get older.

The wealthy tend to travel more. Using unknown networks to control remote devices or conduct financial transactions, especially abroad, puts home networks, sensitive financial information, or even accounts themselves at risk.

Lisa Lindsay, executive director, the Private Risk Management Association

“People think all the time, ‘Everything I do at home I can do remotely,’ and that is true,” said Heather Posner, director of high net worth at Burns & Wilcox. “But … how do you make sure you’re secure? Whether you’re paying bills, filing your taxes, changing your thermostat, setting your alarm, what kind of exposure are you opening yourself up to if you’re not doing that in a secure manner?”

Lindsay agrees. “People have to know public Wi-Fi common sense,” she said. “They’re sitting in a hotel lobby in Rome transacting financial matters. It’s crazy. You shouldn’t even do that [in the U.S].”

Other risks arise from technological advances of another sort. Cyber criminals drive through neighborhoods to access vulnerable home networks, and experts are increasingly concerned about the use of drones, which would allow criminals to detect and hack into networks remotely from a mile or two away, including networks not accessible from the street.

The ultimate goal of those hackers is, of course, simple. “Without a doubt, it is theft of funds from their bank account, through a variety of different means,” said Hartley. “ … That is the highest risk facing high net worth individuals.”

“High net worth individuals have a bigger attack surface. They have more devices, they travel more, they may have domestic staff … more transactions are occurring.” —Martin Hartley, executive vice president and chief operating officer, PURE Group of Insurance Companies

Identity theft or the use of stolen login info to access accounts can be devastating and disruptive, but in those cases the financial institution may accept liability. However, criminals can also use information gleaned from social media accounts, with or without stolen personal information, to craft sophisticated social engineering scams.

Social media posts made while traveling often provide details that make fraudulent correspondence so convincing, and the distance between family members can make fake pleas for money more believable and urgent.

Hartley routinely sees cases where thieves have used information stolen or gleaned from social media to create utterly convincing correspondences instructing personal assistants to transfer often vast sums of money.

“The bank is not liable,” said Hartley. “They say, ‘We followed our protocols. It was your personal assistant, who is an authorized bank user, who wired the money out of the account.’ That money is gone.”

“This is the nature of an evolving risk,” he said. “Today we have $10,000 worth of coverage for this kind of loss,” although PURE will soon roll out new coverage with much higher limits.

Defamation Claims

The fastest growing liability claim, according to a claim supervisor at Chubb, is online defamation, said Oswald’s Lucarelli.

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These claims often have to do with negative reviews on Yelp or other online platforms.

While such a claim may be picked up by a traditional liability policy, Lucarelli sees the potential for coverage gaps.

“If it’s deemed an intentional act there may not be coverage,” she said, adding, “The coverage really is more around bodily injury … Mental anguish isn’t a loss that’s likely covered.”

And coverage under a traditional liability policy maybe not be a sure thing. “AIG calls their coverage ‘silent,’” she said. Meaning maybe they’ll cover it, maybe they won’t.

Ambiguous language typically leans in the client’s favor, but Lucarelli hopes the industry will trend toward more explicit coverage.

Some high net worth carriers have bolstered their cyber offering. Lucarelli said it’s a good start, citing a new coverage from AIG called Family Cyber Edge, which includes coverage for data restoration, cyber extortion and ransomware, crisis management for reputational harm, as well as cyber bullying expenses. “They’ve done a good job rolling a lot of these coverages into one endorsement.”

Still, Lucarelli sees unmet demand for more specific cyber bullying liability coverage. “We interviewed 300 people and most said, ‘If you offer coverage that defines this and you even put a cap a limit on it of, say, $250,000, I’ll buy it.’ ”

Kim Lucarelli, senior vice president and director, personal client management, Oswald Companies

The new, higher-limit coverage PURE will be rolling out in coming months — which will include high-limit coverage for social engineering and cyber fraud losses — utilizes a new approach to cyber security. PURE is partnering with the cyber security firm Rubica for active cyber monitoring.

Coverage will be contingent on having an app installed on each of the insured’s devices. All data will be sent via VPN to Rubica’s cloud, which will use pattern recognition, a constantly updated list of known trouble spots, and AI to flag problems.

“They’re actively monitoring where data packages are being sent and identifying if they go off somewhere they shouldn’t. Then they can shut them off,” said Hartley.

Rubica’s model could be game changing. By monitoring the data itself, Rubica can detect problems regardless of how they are introduced, and avert them before they are executed.

PURE has such confidence in its efficacy that it will be offering coverage limits that would previously been considered prohibitive.

Ultimately, however, the most important aspect of cyber coverage for the high net worth lies in assessing and minimizing cyber risk. “So many people are looking for that,” said Lucarelli. “‘Just give me 10 great tips to make myself more secure.’”

“People want to know how to best prevent this sort of thing, not deal with it after it’s occurred,” agreed Hartley. “The gap between smart risk behavior and not smart risk behavior is one of just simply not knowing.” &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

The Profession

Curt Gross

This director of risk management sees cyber, IP and reputation risks as evolving threats, but more formal education may make emerging risk professionals better prepared.
By: | June 1, 2018 • 4 min read

R&I: What was your first job?

My first non-professional job was working at Burger King in high school. I learned some valuable life lessons there.

R&I: How did you come to work in risk management?

After taking some accounting classes in high school, I originally thought I wanted to be an accountant. After working on a few Widgets Inc. projects in college, I figured out that wasn’t what I really wanted to do. Risk management found me. The rest is history. Looking back, I am pleased with how things worked out.

R&I: What is the risk management community doing right?

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I think we do a nice job on post graduate education. I think the ARM and CPCU designations give credibility to the profession. Plus, formal college risk management degrees are becoming more popular these days. I know The University of Akron just launched a new risk management bachelor’s program in the fall of 2017 within the business school.

R&I: What could the risk management community be doing a better job of?

I think we could do a better job with streamlining certificates of insurance or, better yet, evaluating if they are even necessary. It just seems to me that there is a significant amount of time and expense around generating certificates. There has to be a more efficient way.

R&I: What was the best location and year for the RIMS conference and why?

Selfishly, I prefer a destination with a direct flight when possible. RIMS does a nice job of selecting various locations throughout the country. It is a big job to successfully pull off a conference of that size.

Curt Gross, Director of Risk Management, Parker Hannifin Corp.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

Definitely the change in nontraditional property & casualty exposures such as intellectual property and reputational risk. Those exposures existed way back when but in different ways. As computer networks become more and more connected and news travels at a more rapid pace, it just amplifies these types of exposures. Sometimes we have to think like the perpetrator, which can be difficult to do.

R&I: What emerging commercial risk most concerns you?

I hate to sound cliché — it’s quite the buzz these days — but I would have to say cyber. It’s such a complex risk involving nontraditional players and motives. Definitely a challenging exposure to get your arms around. Unfortunately, I don’t think we’ll really know the true exposure until there is more claim development.

R&I: What insurance carrier do you have the highest opinion of?

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Our captive insurance company. I’ve been fortunate to work for several companies with a captive, each one with a different operating objective. I view a captive as an essential tool for a successful risk management program.

R&I: Who is your mentor and why?

I can’t point to just one. I have and continue to be lucky to work for really good managers throughout my career. Each one has taken the time and interest to develop me as a professional. I certainly haven’t arrived yet and welcome feedback to continue to try to be the best I can be every day.

R&I: What have you accomplished that you are proudest of?

I would like to think I have and continue to bring meaningful value to my company. However, I would have to say my family is my proudest accomplishment.

R&I: What is your favorite book or movie?

Favorite movie is definitely “Good Will Hunting.”

R&I: What’s the best restaurant you’ve ever eaten at?

Tough question to narrow down. If my wife ran a restaurant, it would be hers. We try to have dinner as a family as much as possible. If I had to pick one restaurant though, I would say Fire Food & Drink in Cleveland, Ohio. Chef Katz is a culinary genius.

R&I: What is the most unusual/interesting place you have ever visited?

The Grand Canyon. It is just so vast. A close second is Stonehenge.

R&I: What is the riskiest activity you ever engaged in?

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A few, actually. Up until a few years ago, I owned a sport bike (motorcycle). Of course, I wore the proper gear, took a safety course and read a motorcycle safety book. Also, I have taken a few laps in a NASCAR [race car] around Daytona International Speedway at 180 mph. Most recently, trying to ride my daughter’s skateboard.

R&I: If the world has a modern hero, who is it and why?

The Dalai Lama. A world full of compassion, tolerance and patience and free of discrimination, racism and violence, while perhaps idealistic, sounds like a wonderful place to me.

R&I: What about this work do you find the most fulfilling or rewarding?

I really enjoy the company I work for and my role, because I get the opportunity to work with various functions. For example, while mostly finance, I get to interact with legal, human resources, employee health and safety, to name a few.

R&I: What do your friends and family think you do?

I asked my son. He said, “Risk management and insurance.” (He’s had the benefit of bring-your-kid-to-work day.)

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]