Insurance Assurance Newsletter

Scott Simmonds, CPCU, ARM, CMC
Insurance Assurance Newsletter
Issue #117 - May 2010

The most common question I get from small businesses is, "How do I find the right insurance agent?" The question often comes from very small insurance buyers and non-profits.

Over the ten years that I have been an insurance consultant, I have built a network of hundreds of insurance agents around the country.

I now have a system that will allow insurance buyers access to that network so they can find the right insurance agent.

A reminder, I never accept fees from the insurance agents that I work with for my clients.

No-Risk Guarantee: If I cannot provide you with suitable agents for you to interview and consider, I return your fee.

Intro to Cyber/Internet Exposures & Insurance

As our dependance on both the computer and the internet grows, computer insurance coverage becomes more and more important.

Let's start with the exposures of the computer.

First, there is damage or loss of your "stuff." For example, your computer equipment is destroyed in a fire, or a voltage surge blows out your network, destroying your data. It might be a hacker or virus that corrupts your data to a point you can't use it.

Related to the property loss is the lost income that results from your computer being down. Often called first party losses, these impact you and your operations.

Liability exposures come from your negligence. For example, your network is down and customers cannot use the services they need. Your computer system could spread a virus that damages a customer's network. Perhaps hackers get access to your data and copy customer information.

Liability comes out of your actions (or lack of actions) that injures or damages another. These losses are known as third party losses.

Often, a first party loss can lead to a third party loss. Your data is destroyed by a hacker. The loss of the data prevents a customer from using your service, resulting in higher costs to your customer and a breach of your contract. Your customer sues you.

The following are examples of the two categories of exposures.

First Party Losses:

--Your computer is destroyed by fire.

--A mechanical failure causes your system to crash.

--Your computer is stolen.

--Your data is accidentally erased.

--Your data is not accessible to you because of a virus.

--As your computer is inaccessible, you lose revenue.

--You are the victim of an extortion where a caller demands $100,000 or he will divulge customer data.

--A data breach forces you to undertake a public relations campaign to minimize damage.

--A data breach forces you (by state law) to notify clients and undertake an offering of credit monitoring services.

Third Party Losses:

--Your customers' data is published on a website.

--A breach of your system allows thieves to use customer credit cards.

--Your system infects a customer's system with a virus.

--Your employee accidentally erases a customer's data.

--An employee posts defamatory statements about a competitor on Twitter.

--A web design company accuses you of violating their copyright.

Talk with your insurance agent about these exposures and how your insurance responds. The standard insurance coverages (property insurance and general liability insurance) provide some coverage. Your directors and officers insurance may offer some coverage too.

Some companies should consider special cyber liability insurance. Talk with your insurance advisor.

I fix broken insurance. Uncertain coverage and painful premiums. Consulting on, but never selling, insurance.

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