You're a benefits management company that stores confidential customer records in the seemingly secure electronic databases of your contracted service provider. The service provider is attacked by a hacker who then posts confidential information about some of your customers on the web. The customers mount a class action suit against your firm.
Welcome to the world of e-business risk -- where even if it's not your problem, it's your problem.
As businesses becomes increasingly interconnected through the internet, few are truly independent anymore. Online retailers use outside order fulfillment services to ship customer orders. Banks contract out their online banking operations so they can offer competitive services at reasonable rates. The same electronic tools that vastly increase efficiency and convenience carry with them considerable business risk that can threaten to derail these relationships.
Transferring the risk
If your company conducts any part of its business using internet- or web-based technology, you need adequate protection against a growing list of e-business risks. Even the most advanced security measures can't guarantee 100 percent protection. You need to transfer the residual first- and third-party security risks through insurance.
You've probably discovered that your general liability policy won't cover most e-business activities. Because traditional insurance does not adequately address New Economy exposures, the insurance industry is responding with an entirely new class of coverage to address emerging e-business risks.
More than three years ago, Zurich became the first carrier to introduce an e-commerce protection policy, known as E-Risk[TM]. Since then, advances in internet technology and increasing interdependence have significantly increased companies' exposure and potential liability for internet-related problems. Because of the new vulnerabilities, Zurich upgraded its product to better reflect today's e-commerce environment.
The result is E-Risk Edge[TM] -- an advanced, second-generation e-commerce insurance program that addresses a wide range of e-commerce threats in a single, integrated policy. Coverage applies anywhere in the world, no matter where a loss originated. E-Risk Edge works as a flexible menu of coverages that can be tailored to individual customer needs.
E-Risk Edge reduces the coverage gaps and minimizes the gray areas inherent in most general property policies. Compare traditional coverage versus the protection afforded by E-Risk Edge:
* Loss of business income: Traditional business insurance usually requires direct physical damage or loss to tangible property. E-Risk Edge protects against lost income that results from covered e-business-related losses, for example, when a network is subject to a denial of service attack or is infected by a virus. It also covers extra expenses related to the e-business interruption, including part of the cost of investigating the reason for the interruption.
* Dependent business income: Traditional insurance covers your business and assets only. With E-Risk Edge, you gain coverage for your business income lost as a result of a problem at vendors of goods and services that are critical to your e-business activities.
* Development cost for intellectual property: Traditional insurance doesn't usually cover intangible property such as software and data. E-Risk Edge covers development costs for both loss and damage.
* Public relations expenses: PR can help you rebuild your reputation after an e-business loss, but it can be costly. E-Risk Edge provides coverage for public relations expenses, including consultants, complete PR campaigns and media expenses.
* E-business loss event liability: Traditional insurance requires that there be bodily injury or physical damage before liability insurance comes into play. E-Risk Edge provides coverage for financial claims made against you as a result of a covered e-business loss. It includes reasonable expenses incurred in the defense or appeal of claims.
* Electronic publishing liability: If you publish anything through the internet, E-Risk Edge provides a wide range of coverage, including liability
for the publication of protected material and private facts, copyright infringements, plagiarism or misappropriation of ideas.
* Computer theft: Traditional insurance usually does not cover the value of stolen intellectual property, software and data. E-Risk Edge reimburses you for the value of data, money, securities, software, and other property stolen as a result of a covered e-business loss. It also pays for the cost to restore lost or damaged data.
* E-business extortion: With E-Risk Edge, you're covered for extortion losses and many expenses incurred as a result of a third-party threat to infect your system with viruses, alter or destroy data, steal money, data or resources or divulge confidential information related to your e-business activities. The policy helps to keep your out-of-pocket expenses to a minimum.
* Rewards: E-Risk Edge will pay for information that leads to the arrest and conviction of anyone who commits an illegal act against your e-business activities.
Going forward
It seems clear that the benefits of conducting business over the internet outweigh the risks. Equally sure, however, is that the risks cannot be ignored. Small companies are just as vulnerable as large companies. Companies that don't actually sell over the internet have no more protection than giant e-tailers. The fact is that every business is vulnerable, both directly and indirectly. Every business must determine its risk threshold and take whatever steps it can to mitigate those risks.
For some companies, regulations might determine how they handle their internet-related risks. Already some regulators, particularly in the banking industry, are encouraging companies to obtain specific e-business coverage and to do business with only those third-party suppliers who have such insurance. It's still too soon to say whether having e-business insurance will eventually become mandatory for certain industries, but it's already seen as a plus.
Whether mandated or not, specialized e-business insurance products make sense for most businesses. When you depend on others for your business success, you can't always control the problems, but these products can help you control the outcome.
David T. O'Neill Vice President, e-Business Solutions Zurich North America Financial Enterprises
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