October 17th - 19th, 1999
Hyatt Regency Baltimore, MD

Hackers at the Electronic Gates:
Rick Davis, Co-Founder, Strategic Marketing and Development Officer, INSUREtrust.com
Monday, October 18th, 11:00-11:50 a.m.

"Insurers Seek a Role in Covering Online Risk "

Covering electronic risk involves far more than just the privacy risks typically associated with online shopping, the co-founder of a company specializing in coverage for electronic transactions told insurers Monday.

Rick Davis, co-founder of Insuretrust.com, spoke at "Continuing the E-Volution," A.M. Best Co.'s annual Insurance Information and Technology Conference in Baltimore. The conference continues through Oct. 19.

Even companies that don't sell or transact directly with outsiders face electronic-based exposure. Four main areas of electronic exposure that can affect stakeholders include:

- "Island hopping," in which hackers gain access to a computer network in which the business participates, then travel throughout that network to cause problems elsewhere in the network.

- E-mail exposure, in which companies that send or answer electronic mail can unknowingly include a file that contains a virus.

- Web site exposures, in which the site can fail or be altered to include or precipitate bad information or programming.

- Data-transfer exposure, in which businesses transacting electronically can send incorrect information, corrupting data or causing business problems further along in the chain. "If you're not checking the information that goes across your network, you can have exposures that can seriously ruin your business."

Davis pointed to two areas of risk: first-party claims, in which participants are damaged directly; and third-party, in which someone else in the chain of information suffers a loss because of a security breach elsewhere. But companies that invest great resources in making their security systems foolproof may be overlooking a fundamental advantage of securing insurance coverage for electronic communication--insurance, Davis said: "You don't have e-business risk management without risk transfer.

Even without hacking, online losses can be substantial. Davis pointed to the example of the online auction service Ebay, which saw its market capitalization tumble $4 billion in two days after the company experienced computer problems that restricted access to its site.

Insuretrust.com is a managing general agency that writes coverage for several carriers, including Reliance National. So far, the three-year-old company has never had to pay a claim, Davis said.

By Lee McDonald
Executive Editor