2012 Hot Markets: High-Tech Crime and the Cloud
This article is part of our Hot Insurance Markets for 2012 special feature.
The technology industry has been a growing sector in today’s economic environment and many insurers are responding by developing new products to cover cyber related exposures.
Data breaches have been in the news almost constantly and businesses and insurers are paying attention.
Betterley Risk Consultants recently stated that it believes interest in technology coverage is largely driven by concerns over privacy breaches.
A Betterley sponsored survey found that more than 95 percent of readers see coverage for data breaches as highly or somewhat interesting.
“Combined with increasing pressure by business partners to show evidence of real coverage, the days of self-funding this risk may be about over,” Betterley states.
As demand for this coverage increases throughout the business world, carriers have responded by offering higher capacity and more targeted products. Betterley reports that large carriers will offer up to $25 million in limits for technology risks, and even small carriers will put up between $5 million and $10 million in limits. Excess coverage is available, too.
Cyber related crimes continue to reach new levels of sophistication as well, opening the door to additional risk.
“We continue to witness cyber attacks of unprecedented sophistication and reach, demonstrating that malicious actors have the ability to compromise and control millions of computers that belong to governments, private enterprises and ordinary citizens,” said Mustaque Ahamad, director of Georgia Tech Information Security Center and the Georgia Tech Research Institute in a report, “Georgia Tech Emerging Cyber Threats Report for 2012.”
Cyber crimes such as search poisoning, mobile web-based attacks and stolen cyber data for marketing use have become more common, Ahamad says.
In the Cloud: Cloud computing is another area that is attracting attention. Forecasters predict this industry segment will reach nearly $241 billion by 2020. However, this fast-growing technology brings in a new element of risk exposure when it comes to data protection.
The concentration of data, applications and systems on mega-servers maintained by remote personnel presents distinct risks, according to Judi Lamble, vice president, claims, for OneBeacon Technology Insurance. The risks include loss of service and data, invasion of privacy, compliance issues and other disputes.
“As with any emerging technology, balancing risk tolerance with business benefit is key,” Lamble wrote in a recent Insurance Journal article. “Mitigating that risk with appropriate insurance coverage, such as a data protection and errors or omissions insurance policy, is one way to strike the balance.”
Lloyd’s MGA CFC Underwriting recently launched a cyber liability product with wording to cover the risks of storing data in the “cloud.”
CFC designed the new policy to include the risk of data breach at a third-party cloud provider.
“Cloud computing services are increasingly popular and undoubtedly a huge step forward,” said Graeme Newman, CFC director. “But they do present businesses with new risk exposures.”
Newman said that when a cloud service is adopted, data is effectively “given away” without any type of contractual agreement to protect it.
Since most cyber liability policies focus on the policyholders’ systems, these policies end up excluding the third-party coverage in the event of a breach.
The new CFC policy will cover both the policyholders’ systems and a data breach or data loss from a third-party cloud system.
More Hot Markets for 2012
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