Criminals go digital in a modern terrorist war
One of the most important aspects of life in modern society is that we need to change our traditional thought patterns, in order to address the challenges which are present in society. This is particularly true for the financial services industry which needs to be extra vigilant.
We often watch movies and think that the story lines are so far-fetched that they are not plausible in real life. This was the case with the movie Die Hard 4 where the majority of the plotline centred on cyber terrorism. But how far-fetched is this? Our traditional view of terrorism is the physical act by militant groups. However, we are increasingly seeing a new side to terrorism which has no face, yet is as effective as the terrorist acts carried out by militant groups.
Covering the risk of these terrorist acts from an insurance perspective is becoming important in modern society.
Getting serious
It seems as if governments around the world are becoming more aware of the increasing risk that cyber terrorism poses to the public as well as to their own records. Since 2005, there have been increasing instances of hackers breaching the security walls of companies such as Apple and Yahoo to gain valuable insight into customer behaviour. This increased to a stage where hackers were hacking systems for the sole purpose of stealing information. In 2011, Sony, one of the world’s largest entertainment companies, was hacked. Login details of a number of customers who interacted with worldwide gamers over the internet were stolen.
Since then, there have been a number of other breaches. In December 2013, US retail giant Target was attacked. Hackers managed to steal credit card details of between 70 and 110 million people. This resulted in the Chief Executive Officer (CEO) of Target, as well as a number of other executives at the company, including those who were responsible for online security, handing in their resignations. More recently a central Russian group stole over 1.2 billion passwords and logins from various sites.
“The threat of cyber terrorism is becoming real. The need for the financial services industry to develop and come up with products to protect the industry against this crime is important and will be one of the most significant products in the industry in the near future,” says Nick Schutte, Head of Financial Lines at Zurich South Africa.
South African hotspot
South Africa has always had a reputation for being a crime hotspot, but it is now also becoming a hotspot for international criminals. Schutte points out that cybercrime is becoming the fastest growing risk exposure in insurance circles and South Africa is becoming a breeding ground for it. “According to recent reports, South Africa is the third hardest hit country in the world in terms of the people affected. The first country is China which is followed by Russia,” says Schutte.
Tim Stapleton, Deputy Global Head of Professional Liability and General Insurance for Zurich, says that according to research carried out by the Federal Bureau of Investigation (FBI), South Africa is the sixth most active nation in the world when it comes to cybercrime.
“This is being influenced by two major factors. The first being urbanisation, people are increasingly moving away from rural areas towards urban areas in order to seek better job opportunities and the second biggest influencer is the interconnectivity of people. The growth of smartphone and tablet sales is increasing at a rapid rate, and with the level of information that can be found on the internet, cybercrime is becoming more accessible to the public,” says Stapleton.
The motives of these crimes are also changing. In the past, criminals would troll the internet in order to get user names and passwords and then hold this information at ransom to bribe the companies they stole the information from. However, criminals are now accessing user names and passwords from manufacturing companies and are holding these companies at ransom, threatening to stop production. This is a concern for South Africa as it is a major manufacturing hub in Southern Africa.
Covering the concern
It could have been argued in the past that the public was a bit complacent when it came to the potential threat cybercrimes posed. This however, has changed as the public are now actively becoming aware of the cyber threat. Thomas Hürilmann, Chief Executive Officer (CEO) of Global Corporate at Zurich, says that in the past, it took two years for brokers to sell a cyber-liability policy, it now takes between one and two months.
“When a company is developing a cyber-liability product, there are a few aspects which need to be taken into consideration. The product not only needs to protect against reputational damage, but also needs to cover aspects such as legal fees and reputational campaigns over social media,” says Hürilmann.
The potential cost of a cyber-breach is one of the biggest motivating factors to purchase a cyber-liability policy. News reports show that at the moment Target cannot estimate how much the data breach will cost it in total. In the fourth quarter however, the breach resulted in $17 million of net expenses, with $61 million of total expenses partially offset by the recognition of a $44 million insurance receivable.
Sony executives reported that the cost of a criminal intrusion which exposed sensitive data for more than 100 million Sony customers resulted in a twenty three day closure of the PlayStation Network and costed the company at least $171 million.
Editor’s Thoughts:
Zurich adds that companies that are worth over $5 billion are the main purchases of cyber-liability policies. The need to protect yourself against cyber liability is important as South Africa is a major manufacturing hub in Southern Africa and is a major importer of products worldwide. To have production stopped by terrorists without protection will have devastating effects on companies. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
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