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

Risk Management

The Profession

The risk manager for Boyd Gaming Corp. says curiosity keeps him engaged, and continual education will be the key to managing emerging risks.
By: | May 1, 2018 • 4 min read

R&I: What was your first job?

I was trained as an accountant, worked in public accounting and became a CPA. Being comfortable with numbers is helpful in my current role, and obviously, the language of business is financial statements, so it helps.

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

Working in finance in the corporate environment included the review of budgets and the analysis of business expenses. I quickly found the area of benefits and insurance — and how “accepting risk” impacted those expenses — to be fascinating. I asked a lot of questions. Be careful what you ask for — I soon found myself responsible for those insurance areas and haven’t looked back!

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


I have found the risk management community to be a close-knit group, whether that’s industry professionals, risk managers with other companies or support organizations like RIMS and other regional groups. The expertise of the carriers and specialty vendors to develop new products and programs, along with the appropriate education, will continue to be of key importance to companies going forward.

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

As I’m sure many in the insurance field would agree, Hurricanes Katrina and Rita in 2005 changed our world and our industry. It was a particularly intense time and certainly a baptism by fire for people like me who were relatively new to the industry. This event clearly accelerated the switch to the acceptance of more risk, which impacted mitigation strategies and programs.

Bob Berglund, vice president, benefits and insurance, Boyd Gaming Corp.

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

The fast-paced threat that cyber security represents today. Our company, like so many companies, is reliant upon computers, software and IT expertise in our everyday existence. This new risk has forged an even stronger relationship between risk management and our IT department as we work together to address this growing threat.

Additionally, the shooting event in Las Vegas in 2017 will have an enduring impact on firms that host large gatherings and arena-style events all over the world, and our company is no exception.

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


With the various types of insurance programs we employ, I have been fortunate to work with most of the large national and international carriers — all of whom employ talented people with a vast array of resources.

R&I:  How much business do you do direct versus going through a broker?

We use brokers for many of our professional coverages, such as property, casualty, D&O and cyber. We are self-insured under our health plans, with close to 25,000 members. We tend to manage those programs internally and utilize direct relationships with carriers and specialty vendors to tailor a plan that works best for team members.

R&I: Who is your mentor and why?

I have been fortunate to have worked alongside some smart and insightful people during my career. A key piece of advice, said in many different ways, has served me well. Simply stated: “Seek to understand before being understood.”

What this has meant to me is try everything you can to learn about something, new or old. After you have gained this knowledge, you can begin to access and maybe suggest changes or adjustments. Being curious has always been a personal enjoyment for me in business, and I have found people are more than willing to lend a hand, offer information and advice — you just need to ask. Building those alliances and foundations of knowledge on a subject matter makes tackling the future more exciting and fruitful.

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

Our benefit health plan is much more than handing out an insurance card at the beginning of the year. We encourage our team members and their families to learn about their personal health, get engaged in a variety of health and wellness programs and try to live life in the healthiest possible way. The result of that is literally hundreds of testimonials from our members every year on how they have lost weight, changed their lifestyle and gotten off medications. It is extremely rewarding and is a testament to [our] close-knit corporate culture.

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


Some will remember the volcano eruption in Iceland in spring of 2010. I was just finishing a week of meetings in London with Lloyd’s syndicates related to our property insurance placement when the airspace in England and most of northern Europe was shut down — no airplanes in or out! Flights were ultimately canceled for the following five days. Therefore, with a few other stranded visitors like myself, we experimented and tried out new restaurants every day until we could leave. It was a very interesting time!

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

I am originally from Canada, and I played ice hockey from the time I was four years old up until quite recently. Too many surgeries sadly forced my recent retirement.

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

That’s a funny one … I am a CPA working in the casino industry, doing insurance and risk management, so neighbors and acquaintances think I either do tax returns or they think I’m a blackjack dealer at the casino!

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