In this video, Dan explains how risk financing through insurance responds in a virtual world.
- The rapid growth and impact of technology has turned the insurance world on its head. Insurance underwriting and rates are based on predictive models. If we know anything about technology, predictive is not an adjective that describes it. The rate of volatility has made the insurance companies scramble to keep up with consumer needs for risk financing. The result is that leaders need to educate themselves better about the current risks and how to adequately ensure them to protect the company.
Let's discuss five key virtual areas where businesses are vulnerable to being underinsured. Number one, cyber liability. Companies that store personal identifiable information for employees, clients, and customers are legally responsible for the safety of that information. If it's compromised, then they will be required to make financial restitution to those that have been damaged. I recommend a separate cyber liability insurance policy to protect the organization in case payments are required to help those impacted with identity recovery and monitoring fees.
Number two, loss of business income from cyber. If a computer system is attacked or damaged, then a following loss of income is likely. In today's world, if you can't operate systems, you can't operate. While a loss of income due to suspension of operations is covered under a business policy for many perils, cyber isn't one of them. In order to be reimbursed for loss of revenue and continuing expenses like payroll, this protection is required.
Number three, ransomware. It's much easier to kidnap data than people. You are all familiar with hackers invading a system then holding the data for ransom. Experts recommend not paying the ransom because that just encourages criminals. However, the cost to rebuild and repair after that ransom is expensive. I have a small business client that had a $15,000 bill for expenses and they didn't even pay the ransom.
You need a cyber policy that includes ransomware. Number four, off-site data. Not only are we living in a virtual world, but also a highly mobile one as well. Many business people work in public areas and use the public wifi. That's a breeding ground for cyber criminals sitting over in the corner sipping on coffee to invade and steal information. The first thing to do is educate your people to not use public wifi.
The second is to ensure that your insurance will protect you from loss of data away from your business location. Number five, hardware. The physical loss of your hardware is covered by most insurance policies. I do recommend you check the limits to ensure they are adequate. That being said, more and more equipment devices are leaving the business location and once they are outside of a certain radius, they are no longer automatically insured. Check with your broker to make sure your computer assets are still insured anywhere your people take them.
These five areas are limited or non-existent in traditional insurance policies. So your assignment is to sit down with your broker or an insurance consultant and do a deep dive into your technology usage to provide assurance of your insurance.
- Identifying current and future perils
- Technology risks, including artificial intelligence and autonomous vehicles
- Foreign attacks on your business
- Risks related to cryptocurrency
- Leadership in a global economy
- Insurance responses in the present and future
- How life insurance will change how CEOs view business risks