. E-Business Risk and Insurance

. Insurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions; and state jurisdiction. The instructional materials provided by The Insurance Community Center and its authors is intended as a general guideline and any interpretations provided by The Community do not modify or revise insurance policy language. Information which is copyrighted and proprietary to Insurance Services Office, Inc. (“ISO Material”) is included in this publication. Use of the ISO Material is limited to ISO Participating Insurers and their Authorized Representatives. Use by ISO Participating Insurers is limited to use in those jurisdictions for which the insurer has an appropriate participation with ISO. Use of the ISO Material by Authorized Representatives is limited to use solely on behalf of one or more ISO Participating Insurers. The authors of these materials, Segale Consulting, LLC and The Insurance Community Center assumes neither liability nor responsibility to any person or business with respect to any loss that is alleged to be caused directly or indirectly as a result of the instructional materials provided. Segale Consulting, LLC Copyright 2010 All Rights Reserved 2

. What is E-Business? Any form of business, or administrative transaction, or information exchange, between a company and the outside world, that is executed using any information and communication technology 3

. Types of E-Commerce  , fax, texting for advertising  E-tailor sells using virtual storefronts  Business to Business (B2B or Business to Consumer (B2C) buying and selling  Content aggregator gathers information and resources for website users  mBusiness, uses mobile communications for business applications 4

. What Type of Business Has E- Business Risk?  Virtually all businesses today   Fax  Website advertising  Self  Others  Website sales  Products  Services 5

. Stages of E-Business  First -  Next – sets up a web site to promote company  After that – could be to communicate with customers or to sell products or services 6

. Identify Client E-Business Exposures Some exposures will be covered under routine coverage – others will need special coverages 7

. Common Exposures to Loss Both first and third party loss exposure Transmit virus Lose money due to service interruption Loss of data 8

. Common Exposures to Loss Fraudulent credit card transactions Hacker accesses system and sets up phony transactions Infringement of Intellectual Property 9

. Use an Organized Approach to Identify Risk 10

. E-Business Exposure Review Advertising only Insured’s business only Other businesses Trademarks, music, video Interactive Encryption technology Privacy policy Protection of customer data and credit card information 11

. E-Business Exposure Review Estimate costs for: Restoring data Notifying customers of security breach Penalties / fines imposed by government for security breach Responsibility for costs incurred by customers for credit monitoring Shut down due to power failure 12

. Traditional Insurance Coverage 13

. Property / Liability / Crime Crime Tangible PropertyFraud Exclusions Commercial General Liability Tangible PropertyPI and AI Exclusions Commercial Property Tangible PropertyDirect and Indirect 14

. E-Business and Internet Policies Financial loss to third party Direct and Indirect loss to insured Data and customer driven coverage 15

. Fill in the Gaps Look at the specialized forms to provide coverage where standard policies stop 16

. Coverage Solutions  Costs to restore data (EDP)  Check for virus coverage  Interruption of power (EDP)  Specialized business income and extra expense coverage (Cyber-forms)  Caused by virus, breach of security, notification to customers of breach, payment of penalties and fines by government 17

. Coverage Solutions  Crime  Loss of inventory due to hackers (Computer Fraud Crime Coverage)  Customer use of fraudulent credit card  Coverage not readily available  Third party coverage  Unauthorized access, alteration, copying, and unauthorized use of data  Invasion of privacy 18

. First Party Coverage Check  Damage / theft of data  Business Income and Extra Expense  Remove virus from system  Terrorism  Extortion  Crisis response coverage  Separate limit  Sub-limit 19

. Third Party Coverage Check  Wrongful Act / Claim / Injury definition  Should look very different CGL  Coverage for Intellectual Property suits  Definition including copyright, trademark, service mark, trade dress, slogan  Patent will likely NOT be included  Mostly claims-made and reported forms  Check reporting period 20

. Third Party Coverage Check  When / where must a claim be reported  Hammer clause  Pending and prior litigation  Prior acts  Coverage territory  Undefined  Worldwide 21

. Common Exclusions  Bankruptcy/Financial Impairment  Dishonest/Fraudulent/Criminal or Malicious Acts  Intentional Acts  SEC  Theft of intellectual property  Direct BI or PD  Loss of Use of Property 22

. Common Exclusions  AI/PI  Contractual liability  Computer virus  Product recall  Breach of Warrantees/Guarantees  Cost Estimates exceeded  Performance delay  Security breach/unauthorized acce ss 23

. Common Exclusions Wear and tear Damages during installation or testing Transfer of funds to/from financial institution Preparation of Income tax returns Claims involving Inventories Claims based on survey/forecasts or trends Hardware Pollution 24

. Resources 25

. Some Insurance Markets  Beazley  Hiscox  Chartis  ACE  Chubb  The Hartford  Travelers  Media Professionals – AXIS PRO 26

. Resource Websites      meid=state_of_spam meid=state_of_spam 27