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Date IssueCopyright ©1999, The Industry Standard
Outline
• New or Increased Risks– Security /operational integrity– Content– Function / technology E&O
• Traditional coverage
• Specialty coverage
• Factors for Actuaries to Consider
New LOB or Exposure?
Not Just Priceline & Amazon...
• eCommerce business model risks • Technology & Internet-enabling risks• Standard commercial risks using internet to
varying degree: clicks & bricks• Personal Home Pages - Home-owners
• Another way to segment is by Activity:– Access, Presence, Integration, eCommerce
What are the risks?
• Security /Operational Integrity
• Content
• Function / Technology E&O
Security Risks• Theft & Extortion: Outsider or insider can
steal things or copy secrets, use them or threaten to reveal them publicly.
• Business Income: Outsider or insider, maliciously or not, can interrupt your business.
• Liability: – Downtime - interruption can lead to failed obligations– Negligent Netizen - pass virus, launchpad
Security Perils
• Information Theft
• Malicious Code
• Denial of Service
• Repudiation
• Access Violations
• Programming Errors
• Social Engineering
1st party 3rd party
Content Risks
• Infringement - Trademark, Trade Name, Trade Dress & Copyright
• Privacy / Publicity
• Defamation - Libel Slander
• Content E&O
• Regulatory
Trademark Infringement• Domain Names• Cybersquatting• Metatags• Typo-jacking• Keying• Traditional Infringement: Confusion, incl. Initial Interest
Confusion• 1995 Trademark Dilution Act: Famous marks protected
from dilution & tarnishment
• 1999 - Anticybersquatting Cons. Prot. Act - protects mark holders against bad faith intent to profit actors
Copyright Infringement
• "Literary," "Musical," "Graphic" &
other categories are copyrightable
• Exclusive rights of the copyright holder - reproduce, prepare derivative
works, distribute, perform or display publicly
• Direct, Contributory, Vicarious
• DMCA - protects ISP’s
Privacy
• Law unsettled, Plaintiff’s Bar grabbing at straws– DTPA
– Anti-Stalking, etc.
• FTC• Emotional Issue, teed up to get ugly
Jurisdiction
• Interstate rules established; modification to online fairly well jelled
• International - who knows?– Need to study local laws of all countries in world.
– E.g. - UK Libel-tourism
Outline
• New or Increased Risks– Security /operational integrity– Content– Function / technology E&O
• Traditional coverage
• Specialty coverage
• Factors for Actuaries to Consider
Traditional Coverage
• CGL - fair amount of (at least arguable) coverage - P&AI, PD loss of use– seemingly arbitrary applied to this space
• Property - physical damage to covered property from a covered peril -- safe?– AMERICAN GUARANTEE & LIABILITY v. INGRAM MICRO, INC
Lose / Lose Proposition
• Standard coverage mismatched with modern world
• Consumers face uncertainty - consumers lose
• Loss costs will rise - insurers lose
• Cries out for change
Outline
• New or Increased Risks– Security /operational integrity– Content– Function / technology E&O
• Traditional coverage
• Specialty coverage
• Factors for Actuaries to Consider
Market Evolution of Platforms:
• PI & advertising injury (GL), property and business interruption and crime
• Miscellaneous E&O, media, tech E&O• Elimination of media exclusion,• Addition of worldwide coverage
• Dedicated internet policies• Multi-line• Aimed at riskier and/or larger end of spectrum
Outline
• New or Increased Risks– Security /operational integrity– Content– Function / technology E&O
• Traditional coverage
• Specialty coverage
• Factors for Actuaries to Consider
What’s Next?
• Amazon.Com, eBay, e*trade - specialty?
• Large swath of “standard” commercial?
– Will this mean risk is ubiquitous, therefore swallowed up by standard policies?
– Or are exposures too unique for that platform, spawning new standalone products?
Observations
• A lot of interest, negligible demand– Awareness issue?
• An Exposure and a new LOB
• Many challenges:– Underwriting: “E&O Like”– Rating - black hole– Jurisdiction - crossing their fingers– Technology - what’s a secure socket?
• How big of a deal is all of this???
