Cyber Risk

‘Response and Recovery’ Emphasized for Cyber Attacks

Cyber coverage is readily available and inexpensive, but insureds' understanding of exposures remains mixed.
By: | October 19, 2015 • 4 min read

Cyber insurance is for when technology fails and human nature prevails. That point was driven home most dramatically in an afternoon panel at the Brokerslink Conference Oct. 16 in New York with a story of a $300 laptop that was lost; the company has since spent $800,000 on forensics, notifications and recovery.

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Cyber coverage is both readily available and inexpensive, according to Geoff Kinsella, chief operating officer and partner at Safeonline.

“There are 42 underwriters at Lloyd’s that offer cyber coverage, so many that the organization is concerned about aggregation risk and has added a code to track policies that include cyber,” he said.

Cyber lends itself to managing general agents, and there are three at Lloyd’s, said Kinsella. He added, “I just heard that three more MGAs are entering, and capacity is going up. A lot of that is naïve capital that is just following the dollar. Premium volume is projected to go as high as $80 billion from $2.4 billion today, or so it is said, but I can’t find it.”

The Role of Cyber Insurance panel featured Corey Gooch of Brokerslink; Geoff Kinsella; Marina Barg; Joseph Bermudez and Scott Corzine

The Role of Cyber Insurance panel featured Corey Gooch of Brokerslink; Geoff Kinsella of Safeonline; Marina Barg of Navigators; Joseph Bermudez of Wilson Elser; and Scott Corzine of FTI Consulting.

Scott Corzine, managing director at FTI Consulting noted that “the first thing that clients say to us is, ‘Tell the board about cyber.’ Boards are not comfortable with these risks. They don’t understand the terminology, and they think it is a tech issue.

“So basically there are two kinds of companies: those that have been attacked and know it, and those that have been attacked and don’t know it yet.” — Scott Corzine, managing director, FTI Consulting

“There is a tech part, but after $78 billion spent on cyber defenses, that is clearly not working,” he said. “No amount of spending is going to prevent cyber risk. So we have to turn inside to response and recovery.”

But boards should care, he said, because “it’s not the initial hack that brings down a CEO, or takes a chunk out of the company’s market cap, it’s a bungled management response. Our tech guys tell us the tech part is easy: but that does not change human behavior.”

Marina Barg, senior vice president of U.S. casualty claims at Navigators, noted that while the fall of a top executive or stock price for a major corporation makes the news, “most attacks occur at smaller companies, and wherever there occur, the company often does not know until much later.

“A hack in not like a car accident where everyone knows when it happens. The damage is often not done until way down the road, and by then you are far behind in response.”

“A hack in not like a car accident where everyone knows when it happens. The damage is often not done until way down the road, and by then you are far behind in response.” — Marina Barg, senior vice president, U.S. casualty claims, Naviagators

Corzine concurred. “Big companies often have robust defenses, so attackers can try to worm their way in, or they can get in through a supplier or vendor. In the Target case, the hackers got in through the air-conditioning contractor.

“So basically there are two kinds of companies: those that have been attacked and know it, and those that have been attacked and don’t know it yet.”

The headlines report attacks at Target, Home Depot, Verizon and AT&T, but Joseph Bermudez, regional managing partner at Wilson Elser, said that it is not always malicious activity that causes a cyber loss.

“Sometimes it is a bad act, but often it is an accident,” said, noting that regardless of the cause, “if there is a breach, your client will get a letter from their customer saying that they caused a problem and that they are owed some money. Now your client has a liability.”

Given that likelihood, it would seem owners would be flocking to buy cyber coverage, but that is not the case, said Kinsella.

“Maybe everyone should buy, and every broker in this room has tried to sell cyber. The problem is education. And part of the problem is calling it cyber, because coverage goes much further than just hacking data to mistakes and failures.”

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Kinsella listed four motivations for a risk manager to buy cyber coverage: the board said so; there have been losses already; regulatory or compliance requirements; or contractual obligations.

“So education goes back to motivation, and insurance goes back to exposure,” he said. “Companies don’t buy property coverage and then go check the sprinklers. But we see people try to buy cyber coverage before they determine their exposures.”

It’s only at underwriting that the questions start to come, said Kinsella. “How many devices do you have? How do you move data around the company? Who are your key vendors and providers? Who is responsible for the data they handle?”

Navigators’ Barg noted that even as capacity and underwriting expands, policies remain highly variable among first party and third party, extending to pre-consulting and post-consulting, and with multiple sublimits and attachment points.

Options are good, but complications can be just as daunting to a small company as would be high prices.

“It is the smaller companies that have more to lose than the major corporations,” said Bermudez of Wilson Elser. “A big company has people to fight for their reputation. Main Street does not. Their brands are not so resilient.”

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. 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]