IT insurance becoming more popular option for businesses

With new computer viruses wreaking havoc everyday, the business community is waking up to the need to protect themselves beyond just obtaining virus protection software. Information technology insurance, now widely available to fill in the gaps of traditional commercial liability insurance, is gaining popularity.

It is an emerging insurance part, said Jim Ziolkowski, senior vice president of commercial lines for Welsch, Flatness & Lutz, one of the largest locally-based commercial insurance brokers serving clients throughout the St. Louis region, including St. Charles County. Everyone understands the risk of doing business on the Internet, so the acceptance of it by consumers is becoming more and more.

Premiums written for cyber insurance are likely to exceed $2 billion within the next four to five years, according to the Insurance Information Institute.

According to Ziolkowski, this type of insurance is appropriate for anybody that is doing business either using a computer or conducting business on the Internet. It is also key for anyone that has a receptacle of private information, such as credit card numbers that could be hacked into and wide spread.

Still research shows many companies, both large and small, underestimate the risks of electronic commerce. A 2002 survey by St. Paul Cos. of 501 IT managers and risk managers found that only 55 percent had reviewed their existing insurance for electronic risk coverage. Most likely a company's general liability insurance will not adequately protect IT exposure.

While in the past there have been uncertainties as to which cyber risks are covered under traditional business policies, commercial general liability policies now make it clear with specific exclusions they do not cover data and other network security risks, according to a paper posted on the Information Technology Institute's Web site.

Specialized cyber-risk coverage is available to protect a variety of information technology scenarios, some of which include insuring computer equipment; identity theft insurance, which protects against hacking of or accidental distribution of proprietary information; and business interruption insurance, which covers the loss of income as a result of an attack or blackout.

In addition, Internet liability insurance can cover a variety of situations, including the transmission of a computer virus or other liabilities resulting from a computer attack that causes financial losses to a third party, failure of security that causes network systems to be unavailable to third parties and allegations of copyright or trademark infringement, libel, slander or defamation in a company's Web site.

Determining the amount of coverage involves evaluating the potential losses and how much risk a company is willing to retain.

The best advice is to sit down with your insurance agent and try to determine what exposures your particular risk would have and what would be your worst-case scenario and what would be the likely scenario, said Ziolkowski.

Ways to reduce e-commerce insurance premiums, include accepting higher deductibles or only purchasing catastrophic coverage.

There are three major players in the cyber-insurance arena, according to Ziolkowski. Chubb Insurance, St. Paul Travelers and Hartford all offer various Internet liability products. These companies often package various types of cyber-insurance products together to offer more comprehensive coverage. Though their products are similar, these companies all have their own specialty areas. Chubb, for instance, offers policies specialized for financial institutions.

In addition to purchasing cyber-insurance products, there are steps companies can take to prevent losses in the first place. Ziolkowski recommends using anti-virus software to protect against unwanted filtration, constantly probing information technology systems for weaknesses, having a strategy for what to do if something does go wrong and centralizing responsibility for the company's computer technology systems.

Copyright 2005 Dolan Media Newswires
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