Zurich Financial Services Group has teamed up with International Business Machines Corp. to protect financial institutions from electronic- commerce risks.
IBM will provide consulting to reduce risk from hackers, computer viruses, and electronic theft. Zurich's Fidelity and Deposit Cos. will supply insurance against just about any electronic liability except year- 2000 problems.
With the E-Risk Protection Program, announced last week, "we won't be offering just insurance-this is true risk management," said Tom Beach, senior vice president for risk management services at Fidelity and Deposit, which is based in Baltimore.
The two companies said they are the first to offer a comprehensive product that deals with risks so new that no actuarial data exist for pricing the product.
Without such data, which provide the backbone for underwriting most insurance policies, E-Risk Protection will be individually priced depending on a bank or other institution's variety of electronic operations and associated risks, Mr. Beach said. Premiums will start at $4,000, with coverage limited to $25 million.
Such a premium is reasonable, Mr. Beach said, because even community banks have broad electronic risks.
The first goal of the program is to minimize risk. Craig Kaster, principal with IBM insurance consulting, said IBM will test systems remotely, interview key employees, then develop structured education programs for the companies.
IBM has already analyzed 13,000 company systems in what Mr. Kaster said is the computer giant's fastest-growing business segment. As companies move from staff-based to customer-focused systems, the risks continue to grow, he said.
Once a company has a problem or hacking intrusion, IBM will investigate the extent of the loss. In many previous cases companies have not been able to quantify losses, said Annette Merz, president of Fidelity and Deposits' Financial Services Division.
In developing the product, the companies consulted with a number of banks from small to large. Mr. Beach said they were surprised to learn that the banks, which he would not name, were far more interested in protecting their reputation from an electronic commerce problem than in getting systems back on-line quickly, he said.
To meet that need, it built reputation protection into the product, he said. "We will provide them with funds to hire a p.r. expert to basically put together a plan to mitigate (risk) and recover their reputation," he said.
The program also provides coverage for loss of business income related to an interruption of services. It also pays for investigating the reason for the loss of service.
Other protections include insurance covering gaps in any existing policy coverage, proprietary information or software loss, claims from third parties, and libel, slander, or other electronic publishing liabilities.