Cyber Security

Protecting Data in Motion

Multiple points of exposure within the workers’ compensation industry make it challenging to ensure the security of patient information.
By: | March 5, 2018 • 9 min read

Another data breach in the workers’ compensation world highlights the challenges that all companies operating within the system face in making sure patient information is safe — particularly when multiple parties handle sensitive data.


A cyber security breach at Oregon’s State Accident Insurance Fund Corp. in Salem, Ore. may have exposed confidential information of more than 1,750 people, according to a January article in the Portland Tribune.

The newspaper broke the story after receiving the letter that SAIF in December sent to people whose personally identifiable information was compromised when a hacker gained access to a SAIF auditor’s email account the month before.

That account contained emails which included personal information on employees for six companies who get their workers’ compensation insurance through the quasi-public agency.

Bruce Hoffman, SAIF’s vice president of underwriting, wrote in the letter to affected individuals that there were no reports of identity theft at that time, but that the company would provide them with free credit monitoring and identity theft restoration services.

Cyber security experts and executives within the workers’ comp world give their take on the growing threats and how to best mitigate them.

“Today every company, whether large or small, is a target of identity thieves and others with malicious intent,” said Mick Coady, partner, cyber security & privacy at PwC US in Houston.

“Companies need to begin to think of themselves not as a custodian of the data in their possession but as a data steward, with responsibilities to protect and safeguard the data of their employees and customers,” Coady said.

Jeffrey Austin White, senior vice president; product manager, workers’ compensation, Gallagher Bassett

“We have seen that companies faced with data breaches face significant repercussions to their brand by affected parties, whether they be consumers, customers, or employees due to the hassle introduced into their personal lives due to identity theft.”

The SAIF data breach involving workers’ comp policyholder data is part of a continuing trend in terms of the exposures that put companies at risk, including phishing attacks and social engineering, said Robert Barberi, vice president, team lead FINEX at Willis Towers Watson in Boston.

Based on Willis Towers Watson’s claim data, 66 percent of cyber breaches come from some form of employee negligence or malicious acts, 18 percent are directly driven by an external threat and 2 percent by cyber extortion. Furthermore, 90 percent result from some form of human error or behavior.

“So it’s not just a technology problem — the role that employees play in cyber risk is huge, particularly for insurance companies who have a lot of sensitive personal information in their care, custody and control,” Barberi said.

Tackling the problem requires more than just boosting technology infrastructure and security investments: companies need to look at employees as their first line of defense, he said. Establishing and communicating the role that an employee plays in improving the organization’s cyber security culture is critical.

For example, Willis administered a cyber risk survey to 92 companies, and 18 percent of respondents disclosed they had employees who downloaded software not approved by their IT department.

“It’s important for companies to invest in compensating controls, such as privileged access management and encryption, but they also need to ensure their employees take an active role in helping their organization mitigate these risks,” Barberi said.

From a compliance standpoint, The New York Department of Financial Services has placed some of the most onerous cyber security requirements on financial institutions that do business in New York, he said.

Among the requirements is the designation of a qualified chief information security officer, and specific requirements for encryption, privileged access management and multifactor authentication.

New York DFS also requires senior management to sign off that the company has adhered to these requirements and also mandates that a data breach be reported within 72 hours after discovery.


“Insurers operating in New York are subject to these heightened cyber security requirements which will increase the scope of their breach response obligations and cyber security preparedness,” Barberi said.

Jeffrey Austin White, senior vice president and product manager – workers’ compensation at Gallagher Bassett in Rolling Meadows, Ill., said that most of the cyber threats within workers’ compensation are financially motivated.

“While medical facilities and physicians are required to adhere to strict privacy guidelines related to this information as dictated by HIPAA, workers’ compensation claims adjusters, insurance companies and employers are not.” — Jeffrey Austin White, senior vice president; product manager, workers’ compensation, Gallagher Bassett

Criminals are either holding company data hostage for ransom, or obtaining employment and health records to sell on the dark net for the purposes of insurance, identity or tax fraud.

“We strive to help injured workers make a productive and healthy return to work, and a large part of this responsibility involves oversight of medical care and the reimbursement of medical bills, which requires access to medical records along with verification of personally identifiable information,” White said.

“While medical facilities and physicians are required to adhere to strict privacy guidelines related to this information as dictated by HIPAA, workers’ compensation claims adjusters, insurance companies and employers are not.”

There are multiple points of exposure within the workers’ compensation industry as the interaction points and data exchanges for patient records often include a variety of vendors, employers, contractors, state funds, medical facilities and providers, he said.

“Some of the more rich targets for cyber activity over the last two years have been the state funds that consolidate workers’ compensation data from payers and claims administrators,” White said.

The European General Data Protection Regulation will go into effect on May 25, and although this regulation only applies to companies doing business in Europe, it will have a significant impact on large employers involved in international business, he said.

David Chandler, CIO, CISO, PMA Companies

“I would suspect that these regulations will be used as a roadmap for corporate initiatives and broader legislation to improve data protections and cyber security controls in the United States over the next couple of years,” White said.

There are a multitude of best practices for cyber security threats – because there are a multitude of threats, said Shaun Kelly, director, technical services and information security at Genex Services in Wayne, Pa.

Technical controls would encompass best practices such as current anti-virus on all end systems, data encryption on local storage and restrictions on removable media such as USB/CD drives, web filtering protection, email filtering for phishing and spam, and multi-factor authentication as appropriate for internet accessible applications and connections, Kelly said.

“Focusing on field case nurses, primary security controls are mainly administrative and technical in nature,” he said. “Administrative controls would encompass security and privacy awareness training for all employees and affiliates, employee background checks, and asset management policies and procedures.”

The workers’ comp industry continues to advance in its cyber security strategies and is taking positive actions, said David Chandler, chief information officer and chief information security officer, PMA Companies in Blue Bell, Pa. Many carriers follow the National Institute of Standards and Technology’s five steps in crafting a cyber security framework: identify, protect, detect, respond, and recover.


Protect third-party interactions in which data is shared with vendor partners “can be a complex problem to solve,” Chandler said.

“Carriers need to evaluate existing and potential partners’ cyber security measures based on the information third parties are willing to share,” he said.

Complicating this is that many documents that would help a carrier determine if data is sufficiently protected contain sensitive information, such as network IP addresses or versions of software installed.

“Third parties are likely to be uncomfortable sharing this information, because regardless of nondisclosure agreements and carrier assurances, sharing creates a risk that the information could get into the wrong hands and expose the third party to being hacked,” Chandler said.

If the third party has achieved National Institute of Standards and Technology compliance or a security certification such as ISO27001, ISO27005, or HITRUST, that “is a big step in the right direction,” he said. Achieving an equivalent to the SOC2 and/or SOC3 for service organizations would also be beneficial.

“An independent audit process attesting to the security of data helps bridge the gap between what a carrier needs to know and what a third party is comfortable sharing about their cyber security measures,” Chandler said.

Ruth Goodell, senior vice president for risk management and insurance at Trinity Health in Livonia, Mich., said that patient data, colleague data and financial data “are incredibly valuable to us in the operation of our health system — and it’s also very valuable to cyber criminals.”

“As we increasingly rely on technology, the risk for breaches of our network continues to grow and change,” Goodell said. “The threat actors always seem to be two steps ahead – so we are constantly having to evolve and enhance our network security systems.”

That includes all of the technical approaches to scan and protect the system’s networks, limit access, detect whether or not there are intrusions or malware, educate colleagues, and maintain tested response plans if the system were to have a breach.

Within Trinity Health, stakeholders have recognized cyber security as one of the top risks from an enterprise perspective, she said.

“It’s been incredibly important and valuable to have a chief information security officer who is empowered to recommend and implement all of the investments that are needed, and that the most senior leaders and our board are aware of the risks and support the very significant investments needed to protect this data,” Goodell said.

“As we increasingly rely on technology, the risk for breaches of our network continues to grow and change,” Goodell said. “The threat actors always seem to be two steps ahead – so we are constantly having to evolve and enhance our network security systems.” — Ruth Goodell, SVP, risk management and insurance, Trinity Health

Nick Espinosa, Chief Security Fanatic at Security Fanatics in Chicago, said that a cyber defense strategy is going to fall into three overarching categories — confidentiality, integrity and availability.

“It’s not just about protecting confidential data, but also employees who may access data illegally, not to mention a company’s reputation after a massive breach — something many companies do not survive,” Espinosa said.

“We want to make sure data is only accessible by those who have the requirements to access it. Availability ensures the data has good uptime, and a backup to ensure data is available 24/7.”

Whenever there is a breach of compliance or compliance audit, it’s important for companies to show good faith in their written policies and procedures, and in their continuous monitoring, he said.


“A company can do everything 100 percent right, but that can still fail, as hackers continuously innovate,” Espinosa said. “So it’s important to show good faith to auditors that problems have been mitigated, and that companies are monitoring vendors as best they can.”

Hacking is getting worse every year, he added. In the first six months of 2017 — before the Equifax breach — there were more than 2200 public disclosures of breaches, totaling more than 6 billion records.

The largest “wealth transfer” in history is about to happen: By 2021, the world will have spent $1 trillion in cyber defense. Conversely, by 2021, hackers will have extracted and stolen $6 trillion.

“Unfortunately, cyber defense strategies are a financial pill that companies have to swallow, and they cannot pay lip service to compliance law, or they will ultimately be put out of business,” Espinosa said.

“It’s not a question of if, but when, they are going to be hacked, so companies need a good cyber defense strategy so their business won’t suffer.” &

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance


Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”


“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.


“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?


“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at