Risk Insider: Martin Eveleigh

Cyber Risk Insurance: An Ever-Evolving Coverage

By: | March 28, 2017 • 3 min read
Martin Eveleigh is Chairman of Atlas Insurance Management, which he formed in 2002. He specializes in designing alternative risk transfer programs – particularly risk pools – and captive structures. He can be reached at [email protected]

The evolving category of cyber risk insurance continues to receive increased awareness each year, as more and more security breaches continue to surface. Across all industries, the number of cyber attacks, and the costs associated with them, are increasing.

First, the bad news.

The 2015 Verizon Data Breach Investigations Report identifies the top three industries affected by data breaches as Public, Information and Financial Services; while the 2015 Ponemon Institute Research Report indicates that Health, Education and Pharmaceuticals are the most costly per capita. The overriding message from both reports is that no company is immune to cyber attacks.

There were 79,790 known security incidents globally in 2014 with 2,122 confirmed breaches producing loss. The reports also show a 23 percent increase in the total cost of breaches since 2013 and a 12 percent increase in the per capita cost.

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The Ponemon Report identifies three main reasons contributing to higher costs of data breaches in 2015:

  1. Cyber attacks are more frequent and costly.
  2. Data breach costs are impacted by lost business.
  3. Costs associated with detection of data breaches are increasing.

With risk increasing, it is no longer a question of whether a business will be subject to some level of cyber attack, but when and how. Knowing this, what can businesses do to mitigate the risk and damage?

Professional cyber security consultants agree preparation is key. In addition to developing a compliance work plan, companies should identify unpatched vulnerabilities in software and install test patches regularly. Also, certain industries are now mandating specific regulatory compliance criteria be met, and the insurance industry is taking note.

Creating a More Sound Cyber Risk Policy

Despite the best efforts at prevention, however, the risk of cyber attacks and breaches is great. A company can spend thousands, if not millions, on a security system and firewalls; but one employee opening a phishing email can compromise all defenses and allow criminals inside your system undetected, which is why a robust cyber insurance policy is critical to a company being properly protected.

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Unlike other coverage forms, there is no established standard cyber insurance form utilized by carriers in the standard commercial insurance market. To be protected, businesses need to know whether coverage is provided, and at what level, for:

  • regulatory actions
  • incident response costs
  • credit and identity monitoring
  • transmission of viruses
  • business interruption and extra expenses
  • extortion expenses
  • data loss and restoration

A careful review of coverage is critical because a particular coverage that may be most important to your business could be excluded or limited in scope or amount. A captive is an excellent vehicle for providing coverage for cyber risks, as it has the flexibility to tailor coverage to the specific needs of your business.

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Cyber risk is certainly here and rapidly increasing, but you can reduce its risk to your business with the right combination of security and proper insurance. And for insuring cyber risk, a captive just may be your best solution.

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]