Cover for cyber crime

By PETER GRIFFIN

Better insurance protection could be in store for New Zealand IT companies wanting cover against the rising risk of cyber crime.

Two US companies are offering policies specifically tailored to businesses trading online, an area that the dominant local insurers are approaching with caution.

Online companies have received a battering from repeated hacking and virus attacks in recent months, costing operators millions in lost revenue and down time. The Love Bug computer virus reportedly cost companies billions of dollars, but many found their insurers would not cover their lost earnings.

Minnesota-based St Paul is offering IT liability cover called Techsure just as American International Group (AIG) is launching its NetAdvantage and ProTech policies.

Both companies claim their policies cover the range of potentially expensive internet disasters from technology glitches, defamation and copyright infringements through to virus transmission, hacking and denial of service attacks.

AIG spokeswoman Helen Fitness said the nature of policies with online businesses hinged on assessments of their security measures, mostly be more expensive than traditional insurance policies. security assessments on potential policy holders.

For a company looking to generate up to $1 million, an annual policy would probably cost between $10,000 and $15,000, she said.

AIG has assembled a security panel including KPMG, Simpson Grierson and Bell Gully, to carry out the security assessments on potential policy holders.

"We ask some fairly serious questions about their firewall and if they don't come up to scratch we can cover them subject to them attending to it or right out some of the cover," added Mrs Fitness.

St Paul's technology manager Dean Edwards said policies would cover system problems and companies developing mass-marketed games through to site developers and ISPs.

Chief executive officer of the New Zealand Insurance Council, Chris Ryan, wasn't able to name any major insurers who were underwriting online businesses, but said online businesses were one of many higher-risk categories for insurers.

"Over the last 150 years insurance has developed into very complex business. The covering of risk in cyberspace is just the latest development. Even earthquake cover is highly risky but there's no reason why that type of risk can't be calculated."

Karl Armstrong, director of product management at the country's biggest commercial insurer, NZI, said companies deriving revenue from selling products over the net were covered by NZI, but companies like ISPs who conducted most of their business online were not likely to be underwritten by the insurer.

"I personally believe that sort of cover will remain in specialist markets. You're getting into areas involving things like computer crime that traditional insurers won't right."

But Mr Armstrong added that the big insurers were unlikely to loose business to specialist insurers catering to the IT industry.

"It's not unusual for an insurance broker to dovetail their customers' insurance requirements through multiple markets. It's not as if NZI loses out or is but we're not arrogant enough to think that it's not a threat."