Cyber Security

Into the Breach

State and federal regulators are increasingly looking at cyber defenses, not just breaches.
By: | June 2, 2014 • 4 min read

Think of it as a seatbelt check for cyber security.

Just as police set up checkpoints to audit compliance with seatbelt laws and other rules of the road, state and federal regulators appear increasingly likely to gauge whether companies are following the rules of data protection.

“It’s a logical move, unfortunately, because of Target and all of the other breaches that have occurred, and even breaches within federal agencies,” said Jerry Irvine, CIO of Prescient Solutions, an IT outsourcing company in Schaumburg, Ill. He serves on a public-private task force on cyber security.

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To date, regulators mostly have been reactive, according to cyber security specialists. After a data breach, companies are expected to notify consumers, and to conduct forensic reviews to determine what happened.

The approach also has included an emphasis on disclosure to investors and other stakeholders. In 2011, the U.S. Securities and Exchange Commission issued guidance calling on public companies to discuss cyber risks and incidents in their regulatory filings.

Recently, however, the focus has broadened to include a closer look at cyber defenses, regardless of whether they have been penetrated. The closer look doesn’t necessarily require new laws, experts said.

In May, the New York State Department of Financial Services said it would beef up assessments of cyber security among state-chartered banks. “The revised procedures are intended to take a holistic view of an institution’s cyber readiness and will be tailored to reflect each institution’s unique risk profile,” according to the department.

The SEC, meanwhile, announced this year that it would examine handling of cyber risks by registered broker-dealers and registered investment advisers.

“I think they’re going to be holding more people’s feet to the fire,” said Bob Parisi, managing director and cyber practice leader for Marsh. “But I think it will be through the application of existing regulations and standards.”

No new rules were introduced in the SEC’s 2011 guidance, Parisi noted. But the document prompted action nonetheless. “We saw an absolute spike in companies reporting risks on annual reports and SEC filings,” he said.

It’s not just public companies and financial services in the crosshairs. All companies are likely to face greater scrutiny.

The approach will vary by industry, said Tom Reagan, large risk underwriter for breach response at Beazley, a specialty carrier. “But it does seem clear that regulators do have the bit between their teeth, and they are determined to reach their goal: protection and safeguarding of consumer and corporate information in the U.S. That’s a good goal.”

One sign of increased scrutiny is a rising volume of breaches first identified by law enforcement, rather than the targets, Reagan said, citing anecdotal evidence from Beazley clients. The calls result, in part, from a 2013 executive order from President Obama asking for greater sharing of information with private entities.

“Law enforcement is taking that to heart,” Reagan said.

Regulators also are digging deeper via post-breach audits, he said. Even when the breach seems small, they want to ensure the damage isn’t worse than initially reported.

“They’re pulling on that thread to see where it goes,” Reagan said, noting that regulators are relying on existing authority to do so.

In one case involving the Health Insurance Portability and Accountability Act, or HIPAA, an investigation by the Department of Health and Human Services found that a breach initially described as affecting seven people had actually affected 1,581. The department also found wider noncompliance with HIPAA’s privacy, security and breach notification rules.

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The organization under investigation, Skagit County, Wash., agreed in March to pay $215,000 and work with regulators to strengthen HIPAA compliance, according to the HHS. The breach took place in Skagit’s public health department.

As law and practice continue to evolve in the United States, companies also need to pay attention to developments overseas, said Ken Goldstein, vice president and worldwide cyber security manager for Chubb Group of Insurance Cos.

In many countries, the laws are less stringent, though that is changing.

But even if a company suffers a breach in a country with no rules requiring customer notification, a company’s reputation could still suffer, Goldstein said.

It’s not just regulators who are watching.

“Do you really want to be the company that gets outed by some kind of online expert who’s in the know about breaches, or do you want to make a voluntary notification?” Goldstein said.

Joel Berg is a freelance writer and adjunct writing teacher based in York, Pa. He has covered business and regulatory issues. He can be reached at [email protected]

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]