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Bits Blog: Insurance Against Cyber Attacks Expected to Boom

December 23, 2011 by Leave a Comment

Sony has estimated that data breaches earlier this year cost it $200 million, and its losses are not insured.

Sony is still awaiting the final tally for losses related to its data breaches earlier this year. At last count, it had compromised 100 million customer accounts, and Sony anticipated the debacle would cost $200 million. With 58 class-action suits in the works, that may be wishful thinking.

Now for the really bad news: Sony’s losses aren’t insured.

In a lawsuit, Sony’s insurer, the Zurich American Insurance Company, reminded the company it does not own a cyber insurance policy. Sony’s policy only covers tangible losses like property damage, not cyber incidents.

“That’s cyber insurance in a nut shell,” said Jacob Olcott, a principal with Good Harbor Consulting’s cybersecurity team. “Everybody needs it, and most companies don’t realize they don’t have it until it’s too late.”

Despite high-profile cyber attacks at Sony, Google, Epsilon, RSA and others this year, only a third of companies surveyed by Advisen, a research group, say they have purchased a cyber insurance policy.

Experts say that more companies will buy policies in the coming year because of new Security and Exchange Commission requirements. Last October, the S.E.C. issued a new guidance requiring that companies disclose “material” cyber attacks and their costs to shareholders. The guidance specifically requires companies to disclose a “description of relevant insurance coverage.”

That one S.E.C. bullet point could be a boon to the cyber insurance industry.

Cyber insurance has been around since the Clinton administration, but most companies tended to “self insure” against cyber attacks, says Robert Ackerman, a venture capitalist at Allegis Capital who specializes in cybersecurity.

“Companies don’t want to talk about cyber attacks,” Mr. Ackerman says. “All of a sudden, breaches are now going to be more visible and people are going to have to start estimating their costs.”

There are no statistics on the size of the cyber insurance industry, but Peter Foster, a senior vice president at Willis North America, an insurance broker, estimates there may be $750 million worth of premiums placed. With the recent S.E.C. measure and the frequency and severity of cyber attacks growing, Mr. Foster predicts that figure could grow by 50 percent over the next 12 to 18 months.

The average cost of a data breach hit $7.2 million last year and cost companies $214 per compromised data record, according to the Ponemon Institute. And that’s just for a data breach. If a company’s intellectual property is stolen, it could decimate an organization.

“It is now possible to suck all the information out of a company,” said Scott Borg, chief executive of the nonprofit United States Cyber Consequences Unit.

A comprehensive cyber insurance policy should cover intellectual property theft, said Emily Freeman, a cyber insurance broker at Lockton. Most policies, Ms. Freeman said, cover the “twin risks of privacy and security,” which include the cost of lost business, notification costs, credit-monitoring services, public relations and legal and investigation expenses. It may also cover class-action lawsuits, regulatory investigations, civil fines and even extortion demands.

“There’s no one size fits all. It depends on the size of the company and their exposure,” Ms. Freeman said. “I’ve seen companies buy a million dollars of this coverage with a small deductible. Others have bought $100 million of coverage for a rainy day — the kind of rainy day you might have to disclose to the S.E.C.”

Article source: http://feeds.nytimes.com/click.phdo?i=4796d853d1b7ea77dd4f2afe9add8d8b

Filed Under: Business News Tagged With: , ,

Case Study: Despite 2 Floods, a Business Decides to Stay Put

December 15, 2011 by Leave a Comment

Case Study

What would you do with this business?

Beth Heller (right) and Tamara Quinn.Peter Wynn Thompson
for The New York TimesBeth Heller, right, and Tamara Quinn.

Last week, we published a case study about two disaster-frazzled entrepreneurs seemingly in need of some of the calming supplemental holistic health services — yoga and massage — that they offer at Pulling Down the Moon, a Chicago business that was hit by two floods within a year.

Because the entrepreneurs, Beth Heller and Tamara Quinn, linked their yoga business to referrals from Fertility Centers of Illinois, from which they subleased quarters in a rented building on the Chicago River, they temporarily relocated their business while the similarly displaced fertility clinic reconfigured and rebuilt the first floor offices after the July 2010 flood. This past July, the water damage from the second flood was not as severe. The company was able to stay open during the repairs, which required cutting out the bottom foot of some walls and bringing in industrial blowers. Because of delays with insurance assessments and payment approvals, the restoration dragged on until mid-October.

“It was noisy,” admits Ms. Heller. “But we have great clientele. We put headphones on our clients while they were receiving treatment, and we turned the fans down to a lower level during work hours, and then, when the last patient left, we turned everything up and blasted the blowers all night long.”

As one would expect, considering the varied opinions and advice from both the outside observers we tapped and the comments posted on this blog, the decision to stay on in an uncertain location was not easy for Ms. Heller and Ms. Quinn. In a follow-up interview, they explained their decision to stay, shared some recent developments with their insurance coverage and talked about what they would do if there were yet another flood.

Q: Did you survey your customers and employees to learn their feelings on being dislocated and inconvenienced by your floods?

Ms. Quinn: We did an informal survey at checkout when we were in our temporary location. We asked: How did you find the experience and location? What we should have done is like a SurveyMonkey, something a little more anonymous, because I’d say 80 percent of our patients put a very nice smile on their face and said, “Oh, you guys are so nice here.” A sort of attaboy pat on the back. I’m not certain we got many straight answers. I do remember a couple of clients saying the temporary location didn’t work, that it was noisy and felt incomplete. So I do think we lost some clients, but I also think those who stayed were committed to us on a lot of different levels.

Q: Is it clear what caused the building to flood in those two storms?

Ms. Heller: We don’t know for sure. That first flood flowed with Chicago gossip as to whether the Chicago River locks were open and whether the city failed. The second time it clearly wasn’t an issue with the locks. It was a smaller event. In the first flood we had both backup through the sewers and overage from the river itself. The second time it was just backup.

Q: So who is at fault when the sewers back up? The city? The building? What did the insurance company conclude?

Ms. Quinn: We don’t know. The insurance company never gave us a report as to their findings of who is at fault. If you ask the building management, they say it’s the responsibility of the tenant. Our assumption is that our landlord installed backflow preventers to keep this from happening again, but we’re not 100 percent sure that that has been completed. The other intriguing element to the story is that the building has sold and it’s now under new ownership. It makes getting a lot of answers more challenging.

Q: It sounds like there continues to be some uncertainty.

Ms. Quinn: There is some uncertainty. When Beth and I tried to renew our insurance, we were denied. Our insurance was dropped. Our insurance broker said this had nothing to do with our two losses but because we were becoming more like a bona fide medical facility because we were going into areas like nutritional supplementation, which is a field that scares some insurers, I guess.

Q: Do you have liability insurance and flood insurance at the moment?

Ms. Quinn: We do, but we had to put our entire account up for review and go to the open market. And we’re paying more than twice as much now, up from around $10,000 a year to about $24,000 a year.

Q: You’re insured, but there’s no guarantee, of course, that you won’t have another flood next July.

Ms. Heller: Believe me, Tami and I are going to have our toes, fingers and eyes crossed for the entire rainy season in Chicago. Honestly, Tami, every time it rains don’t you think, Oh, dear God, what’s happening at the river?

Q: Two to one, those we asked to comment on your dilemma effectively counseled you to move to higher ground, saying the stress of staying in a location plagued by uncertainty outweighs even the significant advantages of being down the hall from the main source of your business.

Ms. Heller and Ms. Quinn (in unison): That’s so interesting.

Q: Even with the advantages of being down the hall from the fertility doctors, is the karma really right at this site for an enterprise built upon such healing arts as yoga and massage?

Ms. Quinn: Because our mission is to integrate holistic medicine with traditional Western medicine, we don’t want to be separated. So we’re willing to take the risk of another flood to accomplish that mission, of having a Western medical doctor on one end of the hall and a holistic practitioner on the other end of the hall who talk to each other, and patients who treat all aspects of their person — mind, body and spirit.

Q: Are you watching to see if office space suitable for you and the fertility clinic opens on the second or third floor of your building?

Ms. Quinn: We’ve asked a couple of times: “So, docs, when are you thinking you might want to move and how much longer do you have on this lease?” But we have a really nice relationship with them, and we also have a lot of faith that they’re smart people and they know what they’re doing. If they’re putting their business on the line with some uncertainty, we feel that we can take that same chance.

Q: So if you suffer another flood, you would suck it up and stay where you are?

Ms. Quinn: If we ever had to temporarily relocate again, we would break our lease and say sayonara. I think if it happened a third time, and the doctors didn’t want to move, we’d have to go on our own because at that point we’d just be stupid.

Ms. Heller: But I don’t think the doctors would do another rebuild. If there was another big flood, I think we’d all be moving to Michigan Avenue together.

Article source: http://feeds.nytimes.com/click.phdo?i=96effb6901bb10fb5d41d6865ae351a2

Filed Under: Small Business Tagged With: , ,

Your Money: When One Child’s Illness Is Worth Less Than Another’s

July 22, 2011 by Leave a Comment

In the last couple of years, Sallie Mae has been trying to deepen its financial ties with customers, adding an online bank and a credit card.

And earlier this month, it added a curious product known as tuition refund insurance, which can make you whole if an ill child must withdraw from college sometime during the term.

The insurance, which Sallie offers in partnership with Next Generation Insurance Group, a company it recently bought a stake in, doesn’t treat all sickness equally, though. If a student withdraws because of a physical illness or injury, a family gets 100 percent of its money back. People who leave because of mental health problems, however, get only 75 percent back.

This would probably be illegal if tuition refund policies were deemed health insurance, instead of insurance that just happens to be based solely on your health. Federal law now mandates equal coverage for mental and physical illness in many instances when employers offer any health insurance for mental illness.

Even if disparate tuition insurance coverage is legal, however, it’s still offensive to people who spent their careers fighting for so-called mental health parity. “There should be a buyer beware sign blinking on and off,” said Ken Libertoff, who ran the Vermont Association for Mental Health for 30 years. “Parents need to know that there is a fatal flaw in these plans’ constructions.”

Indeed, that construction suggests a question: Is it even worth taking an insurance offer seriously when it forces you to accept less coverage for the debilitating illness that is most likely to befall you?

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Tuition refund insurance in the United States dates back to 1930, when a company called A. W. G. Dewar offered a plan that provided tutors to families whose children were home sick for an extended period. Eventually, the insurance became a policy that paid out cash to make up for whatever a private primary or secondary school would not refund.

Dewar’s offering took root at private schools, and today it serves about 1,200 private elementary and secondary schools along with 180 colleges, where the tuition stakes can be even higher.

According to Dewar, just over half of secondary schools (though only one college) that offer the insurance make it mandatory for some or all families — say, for new students, who may have adjustment problems — or for anyone who doesn’t pay tuition in full up front. At colleges, fewer than 10 percent of parents choose to buy the tuition refund plans.

That low take rate at colleges probably reflects the “it can’t happen to me” syndrome, but perhaps some parents who have dug into the details discovered that these policies often covered mental illness differently from physical injury. Not only is the payout less, but the insurance often requires a multiday hospital stay as a sort of proof that the depression or anxiety is real.

A couple of years ago, a University of Vermont student named Sherry Williamson discovered that the Dewar policy available to her fellow students worked like that. As a registered nurse suffering from depression, she found the differing treatment difficult to stomach. “I couldn’t believe that UVM, which tries to promote diversity and be all-encompassing, would take on a policy that was clearly discriminatory,” she said.

She found her way to Mr. Libertoff, who got her complaint in front of the appropriate state agencies. Like the federal government, Vermont had its own mental health parity law, but the state ultimately used a separate nondiscrimination statute to force Dewar and the university to equalize its coverage.

In the wake of that decision, another insurance company called Markel that offers tuition refund policies decided to offer equal coverage on all policies nationwide that it sold through schools, rather than risk the wrath of state insurance commissioners.

Sallie Mae, however, chose to adopt the disparate treatment approach even though it’s using Markel as its underwriter. According to John Fees, president of the Sallie partner Next Generation, it had no choice if it wanted to offer affordable premiums to everyone in the United States and do away with any mental illness hospitalization requirement.

How much more would it have cost to offer equal coverage? “I’m not at liberty to say that at this point,” he said. “It’s a confidential business relationship with Markel.”

Mr. Fees seemed a bit miffed by my suggestion that his policy might be discriminatory on its face. “I live with a clinical psychologist, and I had this conversation with her,” he said. “The aim is never to discriminate against anyone.” When I asked Dana Tufts, Dewar’s president, about the potential for discrimination, his public relations representative, Carmen Duarte, interrupted and refused to let him answer.

Discriminatory or not, it’s possible that Sallie’s policy is actually too generous. The price starts at $599 for the maximum $50,000 in school year coverage for tuition, room, board and other related expenses, with some identity theft and medical evacuation insurance thrown in gratis. The price goes down from there if families want less coverage. Also, undergraduates who borrowed money from Sallie Mae starting July 1 get $5,000 in tuition refund coverage free.

Article source: http://feeds.nytimes.com/click.phdo?i=cf1645ab13efa6a49923b5691502fe0f

Filed Under: Your Money Tagged With: , ,

Study Finds Conflicts Among Panels’ Doctors

March 29, 2011 by Leave a Comment

The guideline panels are the select groups of experts who are assigned to evaluate science independently and issue their advice to other doctors on what to do in clinical practice. The guidelines influence medical care, product choice, insurance coverage, government policy and malpractice cases.

The study, published in the Archives of Internal Medicine, found that conflicts of interest were reported by 56 percent of 498 people who helped write 17 guidelines for the American Heart Association and American College of Cardiology, from 2003 through 2008.

Of people who led those groups, an even higher rate — 81 percent — had personal financial interests in companies affected by their guidelines, the study found.

In a related commentary in the journal, Dr. Steven E. Nissen, chairman of cardiovascular medicine at the Cleveland Clinic and a former president of the American College of Cardiology, called for banning most of those conflicts rather than just disclosing them.

In a joint statement on Monday, the cardiology and heart associations said that they had tightened their conflict-of-interest controls in 2010 to align with recommendations from the Council of Medical Specialty Societies. They now require that the people leading the group and a majority of members of any guideline-writing group be free of conflicts of interest.

Dr. James N. Kirkpatrick, the study’s senior author, said its most important finding may be that 44 percent of guideline writers actually had no financial interests in the area they reviewed. That rebuts the argument that there are not enough experienced experts who are independent, he said.

“The conflicts are quite prevalent, but they’re by no means ubiquitous,” Dr. Kirkpatrick, an assistant professor of medicine at the Hospital of the University of Pennsylvania, said in an interview about the research, which was led by Dr. Todd B. Mendelson, now in residency at the University of Pittsburgh.

David J. Rothman, a professor and president of the Institute on Medicine as a Profession at Columbia University, said the study shows an overdue need for change.

“The guy who’s calling balls and strikes should not be a shareholder in one of the teams,” Dr. Rothman said. “It’s so self-evident that if you’re going to be doing guidelines, it should be clean. What’s amazing is that it hasn’t been accomplished yet.”

Dr. Kirkpatrick said the study focused on cardiology because of its many guidelines and thorough disclosure requirements. Dr. Rothman, who was not involved in the study, said that it was also known that cardiologists, along with psychiatrists and orthopedic physicians, have been well-known for taking industry gifts, honoraria, consulting and speaking engagements.

The American Heart Association and American College of Cardiology statement also said their new policies were “almost perfectly aligned” with an Institute of Medicine report last week. That report proposed the strictest rules yet for what it called “standards for developing trustworthy clinical practice guidelines.”

But the institute, the health arm of the National Academy of Sciences, went further than the heart groups.

It not only proposed banning conflicts by chairmen and a majority of members, but it said panelists and their family members should divest themselves of financial investments and never participate in marketing activity or advisory boards for affected companies.

Dr. Ralph L. Sacco, president of the American Heart Association, said his group applauded the journal’s study and institute’s recommendations. But he said requiring divestiture could limit the number of experts available to work on guidelines.

“What becomes difficult is some of the experts out there who are well regarded in their field have often conducted research, and some research on devices and drugs is sponsored by companies,” Dr. Sacco, chairman of neurology at the University of Miami medical school, said in an interview Monday.

That includes himself. Dr. Sacco said he ended his own role in a pharmaceutical company’s research project when he became president-elect of the heart association, a move required by its top officers.

Article source: http://feeds.nytimes.com/click.phdo?i=43fc14ee2aa036ec59ab209906773b7f

Filed Under: Business News Tagged With: , ,