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A Coordinated Defense to Cyber Risk

It’s time to start thinking about cyber risk in a coordinated, cohesive fashion.
By: | May 1, 2017 • 6 min read

Cyber risk is an amorphous threat that demands a coordinated defense from companies, their insurance carriers, and security and privacy professionals.

The exposure is multifaceted, varies from business to business, and continues to evolve. In addition to purchasing cyber insurance, companies can bolster their defenses against this risk by conducting targeted risk assessments and implementing appropriate security controls — but the challenge lies in identifying which security programs and controls an organization needs most, and which vendors provide the best service.

All companies, but especially small- to medium-sized businesses with more limited resources, want to see improvement of their risk profiles translate into discounted insurance premiums.

However, lack of alignment between IT security vendors and underwriters can make that connection difficult to attain, minimizing the value of loss control services. Current underwriting processes typically don’t allow underwriters the opportunity to ask insureds many questions about their security and privacy improvements, and vendors often view insurance as a separate offering, if not an afterthought.

“Part of the challenge has been that you have two different industries — IT security and insurance — working in siloes to address a singular risk challenge. Naturally, security professionals think about risk and control mechanisms differently than insurance professionals, and speak different languages,” said Tom Kang, enterprise cyber underwriting & product lead at The Hartford.

“We believe aligning the solutions — between security and insurance — and providing the right incentives to our clients can make a real difference. A fully integrated solution, with discounts for the service and the insurance, can offer something compelling and help improve cyber risk for our clients.”

It’s time to start thinking about cyber risk in a coordinated, cohesive fashion.

“We believe aligning the solutions – between security and insurance – and providing the right incentives to our clients can make a real difference.”
— Tom Kang, enterprise cyber underwriting & product lead, The Hartford

Connecting Risk Control and Underwriting

“Because cyber risk was emerging so quickly, insureds were often on their own when it came to risk control, underwriters were evaluating an emerging risk and hoping they got it right, and then claims were their own animal,” said Tim Marlin, head of cyber underwriting at Hartford Financial Products.

“But now that the risk is more mature, our views need to mature as well. As we gather more claims data, the industry needs to implement a better, more coordinated strategy than the ad hoc approach that often prevails. Risk control, underwriting and claim response should be thought of as parts of a continuum.”

Insurers play a key role in driving best practices and can help clients align every part of their cyber risk strategy. By thinking through their risk holistically, insurers can help buyers identify their key exposures, establish internal risk mitigation, transfer the risk through cyber insurance, and respond to a breach.

“Insurers themselves have a marketwide view of the risk from underwriting and claims data and benchmarking,” Kang said. “They can help insureds understand whether they are doing the right thing when it comes to identifying and securing their critical assets, complying with a dizzying array of regulations in this space, and direct them to the right resources.”

Many insurers make recommendations on well-vetted service providers, but traditionally there has not been a high rate of engagement because insureds could not see how those services impact their cost of insurance.

“Most insureds and brokers want to see their investment in these services have some kind of impact on premium, and historically insurers have not had much of a response,” Marlin said. “Some provide value-added services packaged with the policy. But including those services doesn’t generally move the premium or risk mitigation needle in any material way for organizations, whether they are mid-sized or large.”

The Hartford goes a step further beyond just finding the best vendors in the business. If clients use approved service providers and services, they can report it to The Hartford’s underwriters, who will factor the risk controls into calculations of the insurance premium.

“These are vendors we trust to help our clients get better at managing cyber risk,” Marlin said. “If they are strengthening their security, it feeds directly into our underwriting process and results in a premium incentive.”

By connecting the use of risk control services to insurance cost savings, The Hartford incentivizes clients to implement best practices in cyber risk mitigation and reduce their exposure to loss.

“An insurance policy should help you get better. Not just on the front end before there’s a claim, but after a claim as well.”
— Tim Marlin, head of cyber underwriting, Hartford Financial Products

From Coverage to Breach Response

Carriers can also work more closely with brokers and insureds to help them determine what the most appropriate coverage is for their particular business. An organization’s size and function both influence what type of coverage is required.

Small and mid-sized companies with limited resources, for example, may be less inclined to purchase a mono-line cyber product than to embed coverage within a different policy, like General Liability or E&O — where cyber coverage originated.

“When you think about the risk holistically, you can more thoughtfully plan what risk you will retain, mitigate or transfer. Part of thinking about the risk holistically also includes developing a robust cyber incident response plan, and thinking carefully about recovery and necessary improvements,” Kang said.

Beyond the traditional response services that are often included in cyber insurance policies and the claims process, policyholders should think about remediating the privacy or security issue that led to the claim.

That’s why The Hartford offers a cyber security expense fund as an additional endorsement on its CyberChoice First ResponseSM product. While the policy will help cover the costs of an incident response, the fund will help to cover the costs of remediation after the claim.

“Coverage typically stops at the claim. But we wanted to go a step further. Similar to pre-breach services, the fund can be used to strengthen those vulnerabilities that were targeted in the event,” Marlin said. “Perhaps more than pre-breach services, we believe engaging the insured after a claim is the best time to help them get better. They have had a loss and they understand very specifically what vulnerabilities they have and the impact of the exploit. No one else in the market offers a coverage like this.

“An insurance policy should help you get better. Not just on the front end before there’s a claim, but after a claim as well. We help clients get stronger through every part of the cyber risk management continuum.”

FOR PRODUCERS ONLY. CyberChoice First Response is offered on a SURPLUS LINES* basis. This material is not to be used for solicitation purposes. The Hartford has arranged for data risk management services for our policyholders at a discount from some third-party service providers. Such service providers are independent contractors and not agents of The Hartford. The Hartford does not warrant the performance of third-party service providers even if paid for as part of the policy coverage, and disclaims all liability with respect to use of or reliance on such third-party service providers.

*Eligibility for surplus insurance coverage is subject to state regulation and requires the use of a licensed surplus lines broker. Surplus lines insurance policies are generally not protected by state guaranty funds. Policies should be examined carefully for suitability and to identify all exclusions, limitations, and other terms and conditions. Surplus lines coverage is underwritten by Pacific Ins. Co. Ltd (except in CT and HI) and The Hartford Ins. Co. of Illinois in CT and HI. The Hartford® is The Hartford Financial Services Group, Inc. and its subsidiaries. Its headquarters is in Hartford, CT. All rights reserved.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with The Hartford. The editorial staff of Risk & Insurance had no role in its preparation.




The Hartford is a leader in property and casualty insurance, group benefits and mutual funds. With more than 200 years of expertise, The Hartford is widely recognized for its service excellence, sustainability practices, trust and integrity.

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]