Category Archives: Insurance

Businesses Ignore Significant Cybersecurity Risks to Proprietary Data

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Knowledge assets are critical to any business remaining functional and competitive, yet this data is routinely exposed to the risk of theft and overlooked in cybersecurity risk management. According to a new report from the Ponemon Institute and law firm Kilpatrick Townsend & Stockton, the organizations are increasingly ineffective at safeguarding data like trade secrets, product design, development or pricing, and other proprietary information.

As breach notification laws, regulatory requirements, and reputation considerations draw more focus to cybersecurity surrounding personal data of customers or personnel, businesses are leaving more risk on the table regarding their most valuable assets, and that risk has a notable price tag.

In the past year, the average cost of remediating these attacks was about $5.4 million, and half of respondents estimated the maximum cost would range over $250 million, with seven out of ten placing it over $100 million. What’s more, on average, respondents believe only 35% of the losses resulting from knowledge asset theft would be covered by their current insurance policies.

The primary drivers of these costs, respondents said, were (out of 100 points):

knowledge asset theft costs

Why are so many businesses failing to take action against the risks to knowledge assets?

knowledge asset data theft risk

Among the findings, the report noted:

  • Theft is rampant. Seventy-four percent of respondents say it is likely that their company failed to detect a data breach involving the loss or theft of knowledge assets, and 60% state it is likely one or more pieces of their company’s knowledge assets are now in the hands of a competitor.
  • Companies don’t know what they need to protect, or how to protect it. Only 31% of respondents say their company has a classification system that segments information assets based on value or priority to the organization. Merely 28% rate the ability of their companies to mitigate the loss or theft of knowledge assets by insiders and external attackers as effective. The great majority who rate their programs as not effective cite as the primary reasons a lack of in-house expertise (67%), lack of clear leadership (59%), and lack of collaboration between different job functions (56%).
  • Executives and boards aren’t focused on the issue and its resolution. A data breach involving knowledge assets would impact a company’s ability to continue as a going concern according to 59% of respondents, but 53% replied that senior management is more concerned about a data breach involving credit card information or Social Security numbers than the leakage of knowledge assets. Only 32% of respondents say their companies’ senior management understands the risk caused by unprotected knowledge assets, and 69% believe that senior management does not make the protection of knowledge assets a priority. The board of directors is often even more in the dark. Merely 23% of respondents say the board is made aware of all breaches involving the loss or theft of knowledge assets, and only 37% state that the board requires assurances that knowledge assets are managed and safeguarded appropriately.
  • Careless employees and unchecked cloud providers are key risk areas. The most likely root cause of a data breach involving knowledge assets is the careless employee, but employee access to knowledge assets is not often adequately controlled. Fifty percent of respondents replied that both privileged and ordinary users have access to the company’s knowledge assets. Likewise, 63% of respondents state that their company stores knowledge assets in the cloud, but only 33% say their companies carefully vet the cloud providers storing those assets.

Thanks in part to the lack of action currently, there is plenty businesses can easily do to improve.

“Companies face a serious challenge in the protection of their knowledge assets. The good news is there are steps to take to reduce the risk,” said Dr. Larry Ponemon, chairman and founder of the Ponemon Institute. “First of all, understand the knowledge assets critical to your company and ensure they are secured. Make sure the protection of knowledge assets, especially when sharing with third parties, is an integral part of your security strategy, including incident response plans. To address the employee negligence problem, ensure training programs specifically address employee negligence when handling sensitive and high value data.”

Employee Financial Stress Can Impact Job Performance

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Employees stressed out by financial problems could be suffering from lack of sleep and are more prone to depression, heart issues and substance abuse than those with low levels of stress, according to a new study. This anxiety can also impact the workplace in the form of lost productivity, heightened risk of on-the-job accidents and absenteeism.

Most employees worry about their personal finances, with 25% of those surveyed indicating high or overwhelming financial stress. About one-third were assessed as vulnerable to living beyond their means and having serious debt, according to this year’s Stress in America survey, commissioned by the American Psychological Association.

The survey found that:

  • Nine percent of millennial women under age 30 reported overwhelming financial stress compared to 5% of their male counterparts.
  • Lower-income males (making under ,000 a year) were more likely than lower-income females to report no financial stress, at 13% versus 9%.
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  • Women’s stress levels seem to be impacted by the presence of minor children in the household, with 11% of women with minor children reporting overwhelming levels of stress, compared to only 6% without children. Men’s stress levels seem to not be significantly impacted by the presence of minor children, as only 6% of men with children in their household reported overwhelming levels of financial stress, compared to 4% of men without children.
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Treatment for financial stress is becoming more common in the workplace. According to a report by Aon Hewitt, 89% of employers are very or moderately likely to implement or expand programs to help employees better manage their money as part of their overall benefits package.

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The report finds that sleep programs, financial counseling and personal coaching can help stressed employees.

Issues resulting from financial stress include:
Infographic_StressReport

June Commercial Insurance Rates Up 1%

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The composite rate for commercial insurance placed in the United States rose to minus 1% in June from minus 2% in May, according to MarketScout. One of the most significant changes was rates for transportation accounts, which moved from minus 2% to plus 1%. Rates for every industry class, except habitation and transportation, moderated by 1%. Habitational rates were unchanged at minus 2%.

Industry class chart-1

Industry class list

“Insurers are getting tired of cutting rates,” said Richard Kerr, chief executive officer of MarketScout. “There are still pockets of very competitive business; however, it is beginning to look like insurers are willing to maintain the rate reductions of the past few years and not cut rates even further.

”

Coverage classifications business owners policies (BOP), umbrella and professional liability all moderated by 1%, compared to the prior month. EPLI rates were up 1% and commercial auto rates moved from flat to plus 2%.

coverage class list
By account size, medium (,001 to 0,000) and large (0,001 to ,000,000) accounts moderated to minus 1% and 2% respectively.

Rates remained the same for all other account sizes.

Account size

Protecting Key Executives in Global Hot Spots

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The recent suicide bombing in Istanbul and the Paris bombing last November killed and injured innocent bystanders and sent shockwaves around the globe. Such attacks also cause organizations to question international travel out of fear of putting their key executives and employees in harm’s way.global travel

As the risk profile changes in some locations that were once considered safe, it is critical to reassess and more deeply examine company programs to protect business travelers abroad.

First of all, for companies and their insurance advisors, there is no substitute for great advance planning. If a company is contemplating overseas travel and can establish well in advance that there exists a need for key person insurance, the coverage is easier to obtain and more cost effective. The reality is that the heightened awareness around a dangerous trip often results in an insurance need being developed or uncovered with little notice. When this need arises, the underwriting process migrates from the traditional life and disability insurance market to the playing field of high limit or specialized risk underwriters.

In one notable example, a large U.S. company recently made a significant investment in a defense contractor. Shortly after the investment closed, the company named a new chief executive officer and sought to acquire $50,000,000 of key person life and disability insurance.

As of the day of the request, their insurance advisor had eight business days to secure the insurance before the CEO departed for the Middle East, with stops in such international hot spots as Iraq and Afghanistan. Because of the abbreviated time frame, traditional life and disability insurance was not an option. The advisor needed to turn to a specialty underwriter that deals with exceptionally large and complex human capital risks.

Armed with the CEO’s itinerary (see below) and details of the executive’s compensation and equity incentive agreement, the advisor had enough information to present the submission to the underwriters.

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Within 72 hours, a policy was issued that covered the private equity firm’s loss of the CEO directly due to an accidental death or disability, as well as a result of acts of war or terrorism.

Few domestic life and disability carriers possess the ability to underwrite large risks when there is high-risk exposure in the world’s hot zones. Instead, companies and their brokers must work with large international insurers that are willing to deploy meaningful capacity.

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The easiest way for advisors to access these markets is through an experienced U.S.-based correspondent who is skilled at designing and underwriting coverage in these volatile locations. Local correspondents or managing general underwriters also serve to guide brokers through the regulatory complexities that go along with underwriting risks through surplus lines carriers—something most life and health producers have little experience with.

The best brokers are masters at uncovering details from their clients, documenting them and communicating them effectively to underwriters. A well-written cover memo will often be the basis for offering coverage and can be the primary source for pricing consideration. A complete itinerary coupled with security details are the underwriter’s key points of interest, so make sure the information is gathered and communicated as early as possible.

Frequently, specific plans will be classified when working with international defense contractors, but one way or the other, the basic information must be made available. When underwriting coverage in highly hostile areas, rates can vary based on multiple factors, such as security arrangements, travel vendors, length of stay and, in highly hostile areas, rates even vary down to specific latitude and longitude coordinates, often within a single city or locale.

No detail is too small for spelling out the need for the insurance and financial justification, including the purpose of the trip and the client’s specific duties and objectives. This is the information that sets apart a submission and makes it more likely for an underwriter to go out on a limb with preferential pricing and terms.

Keep in mind, when underwriting risks in highly volatile areas—with the propensity for rapid deterioration—it may not be possible to negotiate coverage or a rate guarantee for the entire duration of the client’s journey. It is essential to keep in mind that the best underwriting offers go to advisors who deliver the most detailed and accurate information.

Example of a CEO’s itinerary:

Day 1 – Depart Commercial Air for Dubai

Day 3 – Arrive in Baghdad, Iraq – Transport to Camp Butler

Day 4 – Depart Baghdad and arrive in Dubai

Day 5 – Depart Dubai arrive Kabul, Afghanistan – Transport to Camp Gibson

Day 6 – Fly to Kandahar, Afghanistan

Day 7 – Depart Kandahar, Afghanistan – fly to Abu Dhabi

Day 12 – Depart Abu Dhabi for U.S.

It is important that we don’t allow acts of terrorism to knock the wheels off our economy. Business travel and face-to-face meetings are key elements in making us what we are, so it’s imperative that we mitigate the associated risk whenever possible.

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