Sponsored: Philadelphia Insurance Companies

These 4 Cyber Trends Demonstrate That Your Risk Exposure is Bigger than You Think

Technological advancement, increased connectivity, and more cunning hackers all drive the evolution of cyber risk. Companies that don’t keep pace are exposed.
By: | October 2, 2018 • 6 min read

The earliest iterations of cyber insurance covered liabilities associated with network failures or breaches of private data — if your system security failed for any reason, cyber insurance covered the cost of the response. Traditionally, the retail, healthcare and financial services sectors were the top buyers of cyber polices; as handlers of personally identifiable information, their exposure was greatest.

But it’s not just about credit card or Social Security numbers any more.

Due to rapid advancements and increasing reliance on technology by businesses of all kinds, cyber risk has grown much bigger and much harder to define.  Companies in every industry are waking up to the fact that, as long as they use technology to conduct business in any way, they are vulnerable to cyber risks.

“Especially in the past few years, there’s been a growing demand from non-traditional cyber buyers like manufacturers and nonprofits, for example,” said Evan Fenaroli, Cyber Product Manager, Philadelphia Insurance Companies (PHLY).

Though they recognize their exposure, newer and nontraditional buyers also need to stay attuned to the fact that cyber risks are constantly evolving. A cyber policy purchased five years ago may not suit today’s risk profile.

“A cyber product is not a one-and-done solution,” Fenaroli said.

These four emerging threats exemplify how rapidly cyber risk changes, and why evaluating coverage needs should be an ongoing conversation:

1. There Are More Opportunities and More Severe Consequences of System Failure

Evan Fenaroli, Cyber Product Manager, Philadelphia Insurance Companies

Business Interruption coverage has been a primary component of most stand-alone cyber insurance products for at least a decade now, with coverage traditionally triggered by distributed denial of service (DDoS) attacks, malware, or other malicious attacks directed at the insured’s own computer system or website.

But exposure to network disruption extends well beyond the internal computer system, particularly as businesses become increasingly reliant on cloud-based platforms, third party applications and other outsourced services. An attack on a critical vendor or unplanned outage at a cloud provider could cause major downstream interruption.

“We’re in an era where cloud computing is the norm rather than the exception,” Fenaroli said. “If you’ve outsourced your IT services or any network components, and that third party suffers a service interruption, that directly impacts your business.”

Errant updates and other internal operational errors can also be a source of network failure. To keep antivirus and firewall software up to date, companies are encouraged to run updates as regularly as possible. Often, organizations will install new software overnight or over a weekend to minimize disruption during working hours, but if a glitch takes everything offline, it could be anywhere from a few hours to a few days before the problem gets fixed.

Though denial-of-service attacks and data theft make headlines, these more unassuming sources of system failure can still cause substantial business interruption and contingent business interruption losses.  Luckily, coverage triggers under many cyber policies have expanded to encompass these scenarios, although buyers should look out for sub-limits or other restrictions.

2. Ransomware Attacks Are Growing More Costly

“Ransomware used to be run-of-the-mill crypto lockers, where target companies would have to pay $300 or some small sum to get their data released and regain access to their systems,” Fenaroli said.

“But today more cyber thieves are asking for payments in Bitcoin, and if they realize they’ve caught a company with deep pockets, they’ll negotiate a higher payment rather than setting a ransom up front.”

Paying ransoms in cryptocurrency requires access to a crypto-wallet — not something every organization has readily available. And increasingly, paying the ransom is no longer a guarantee that data and network access will be restored.

Amateur hackers can purchase ransomware “starter kits” on the dark web. These ready-to-use packages allow thieves of any skill level to launch their own attacks, Fenaroli said, and they may not include a key to unlock hostage data after a ransom is paid. Often, targeted companies find that their data is permanently corrupted or lost, and subsequently must pay to have it restored on top of paying a steep ransom.

“The best thing a company can do is update security patches to seal vulnerabilities in their systems and keep these viruses out,” Fenaroli said. Moreover, incident response planning and well-practiced back-up recovery procedures can go a long way toward mitigating the business impact when incidents do occur.

3. More IoT-Connected Devices Amplify Exposure to Hacks or Malfunction

Smart devices connected to a corporate network via the Internet of Things exponentially increase the number of access points for hackers and represent more single points of failure.

Failures of IoT-connected devices can also result in damages that fall outside the scope of a cyber policy. If a temperature-monitoring device on a cargo truck fails, for example, liability for damaged inventory likely won’t be picked up by cyber coverage even though the underlying cause was a system failure.

“It’s important to recognize the additional risks created by IoT technology and ensure you have coverage for it somewhere, because a standalone cyber policy likely won’t respond to every scenario,” Fenaroli said.

“Even before you think about coverage, evaluate whether adopting IoT technology is actually a good business decision. Is it going to improve your operations, make you more efficient and make you money? Or are you just doing it because it seems cool?”

4. The Growing Threat of a Cyber CAT Imperils Market Stability

Increasing connectivity and technology dependence presents risk not just for businesses, but for the carriers who insure them.

In 2016, domain name provider Dyn was targeted in a DDoS attack that caused shutdowns of major Internet platforms and services across large portions of Europe and North America. The attack was launched in three waves over a single day, causing at least six hours of downtime for Dyn clients and, according to some estimates, about $110 million in total business interruption losses.

While this particular incident did not make a huge dent on insurers’ balance sheets, it did bring attention to the catastrophic loss potential of aggregated cyber risk.

“On one hand, there’s a lot of capacity in the cyber market leading to soft conditions where pricing is going down and coverage is expanding, but then there is this looming threat of a catastrophic cyber event that could flip the market on its head,” Fenaroli said.

To best position themselves for success amid market disruption, companies should look for carriers that work with modelers on cyber CAT scenarios.

“Work with an underwriter who is aware of this threat and writing their coverage accordingly,” Fenaroli said.

For Best Outcomes, Turn to Experienced and Adaptable Cyber Carriers

Philadelphia Insurance works with modelers to assess the impact to their portfolio business if a common operating system or cloud provider goes down.

“That knowledge allows us to come up with more accurate pricing and ensure we’re not taking on too much exposure, so that we can pay these losses if they were to occur,” Fenaroli said. “Our top priority is trying to be that stable backstop for the buyer.”

Since launching a stand-alone cyber product in 2009, Philadelphia Insurance’s broad form has served the needs of small- to medium-sized businesses in all sectors, including traditional cyber exposures in healthcare and financial services, as well as newer buyers in the nonprofit and manufacturing sectors.

“But our policyholders have come to know Philadelphia not just for our coverage, but for our pricing stability, our risk management resources, and our claims handling.”

Along with a recommended panel of breach response vendors — including forensic investigation, public relations and law firms — Philadelphia also offers an online cyber risk management portal with tools like a breach cost calculator and sample policies and procedures.

“It helps to get the ball rolling on implementing some of the policies, procedures and incident response plans,” Fenaroli said. “Being prepared is just as important as having the coverage.”

To learn more, visit



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

Philadelphia Insurance Companies (PHLY) offers product-specific resources, alliances, and service capabilities to achieve a multi-faceted approach to risk management, including safety program development, site audits, and training (including interactive web-based training). We offer a wide range of products and value-added services at financial terms to be agreed upon to help you achieve your risk management goals.

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.


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.


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]