Small Business Insurance Against Cyber Crime

A Insurance Article Contributed by Deepak Cutting

The Need for Cyber Insurance;

Businesses, big and small, are increasingly dependent on computer networks to manage data that is vital to their functioning & require insurance against Cyber crimes.

A computer crashing or loss of data is a common occurrence. If such an event destroys important data, it will cost the small business more than they anticipate. As companies become more dependent on their computer networks, their vulnerability to Cyber catastrophes increases. The number of incidents reported rose by 377 percent between 2000 and 2002. An incident may involve one site or possibly thousands of sites.

The number of potential system vulnerabilities has increased by 378 percent, increasing from

1,090 in 2000 to 4,129 in 2002. Possible effects of a Cyber attack include denial of service, unauthorized use, loss/misuse of data and loss of public confidence regarding an organization. It is estimated that nearly $200 million were lost on account of Cyber crimes in 2003 alone.

The security threat from computer related crimes is steadily rising as time goes by and better prevention techniques are put in place.

An insurance policy to recover the losses on account of Cyber crimes is therefore getting increasingly essential to the survival of your business. Unfortunately, most companies are operating in the 21st Century with an insurance cover that would be considered adequate in the 19th Century. It is necessary to note that your usual business insurance policy does not protect you fully against Cyber crimes.

The Cyber Insurance;

The insurance industry has developed products specifically for this purpose. Businesses today face the increasing risks of shutdown of their systems, destroying of vital data or theft of customer information. Businessmen now realize that they are liable to be sued if there is leakage of personal information about their customers from their end but few have taken adequate insurance to guard against such losses.

In fact, as per a recent survey, only 7% of businessmen know that such specific insurance cover is available. About one third of businesses surveyed thought that they had the insurance protection that they actually lacked. Since general insurance policies do not provide such protection and also since the menace of Cyber crimes has assumed a large proportion and is steadily increasing, the number of businesses who have obtained the proper insurance policy is abysmally low.

The Insurance Cover Required

A specialized insurance policy dealing with risks related to Cyber crimes should provide both direct and third party covers in respect of the following:

· Loss/corruption of Data,

· Business interruption,

· Liability, arising from breach of privacy due to theft of information, transmission of computer viruses causing financial loss to third parties, failure of security that made unauthorized access to the network possible. Also, allegations of copyright or trademark infringement, libel, slander, defamation or other "media" activities in the company's web site.

· Dealing with extortion threats to damage the network of the business,

· Cost of offering rewards to people who help identify the hackers,

· Public relations costs associated with damage to business due to Cyber crimes,

· Cost of accessing an identity theft call center in the event of stolen customer or employee personal information.

The insurance cover should apply both to internal and externally launched attack, as well as worms and viruses.