No one is immune to this threat and knowledge is the foundation of prevention
Attacks on Businesses
A corporate accounting client of mine offers bill paying as a service to customers and was tricked into thinking one had requested a wire transfer. It wasn't until the next day when they realized the entire request was fraudulent, and unfortunately the moment the money was sent it was gone forever.
This impersonation scam looked legitimate because it was the client of the accounting firm that was hacked, not the accounting firm itself. The hackers were then able to present what looked like a valid transfer request using familiar bank names, and the rest was history.
That wasn't the first breach I had been privy to and it won't be the last. Cyber-crime has been around as long as the Internet and is here to stay.
What's particularly alarming is that it's a more lucrative industry than the illegal drug trade and the criminal has a lower risk of getting caught. (1)
Attacks on Affluent Families
The above information focuses on commercial cyber-crime, an exposure that gets a lot of media attention and for which adequate insurance is available to address the exposures. My goal, and the point of this post, is to highlight the personal threats that exist for affluent families, and what can be done about it.
Affluent families have an increased risk of cyber-crime for two primary reasons: first, if a cyber criminal's main motivation is monetary, those with higher financial means represent a greater payout potential than mainstream America; second, the affluent share certain traits, in addition to those financially-based, that are attractive to cyber criminals.
Here are some of the traits that affluent families often possess and sample exposures to go along with them:
1. Employees and/or outsourced management of their affairs.
Each employee or vendor is another entry point into a family’s network for cyber criminals.
2. A comfort level with large transactions and/or transfer of funds.
Imagine a hacker posing as you and instructing your assistant to transfer funds.
3. Increased travel and reliance on mobile devices.
This leads to more exposure to public Wi-Fi networks, which don’t possess the same level of security as a private, secure network.
4. Home offices that house valuable financial and intellectual property information.
This is information that may be used against you for financial gain.
5. Home Wi-Fi networks.
An attacker can create a Wi-Fi account that is named similarly to yours, attempting to trick you or a guest into connecting to it instead of the real, secured network.
6. Automated homes with smart thermostats, webcams, and other devices.
A hacker can disarm the thermostat in your second home. The lack of air conditioning leads to mold or lack of heat causes pipes to freeze.
7. Known reputations in the community.
These reputations could be leveraged by a cyber-criminal for extortion.
8. Children whose online activity doesn't get monitored.
Children often alert their online networks when they’re on vacation, where they're babysitting alone, and may be guilty of cyber-bullying, libel, slander, or defamation. All of these scenarios present their own risk exposures.
After reading the above information, you are likely to have two follow-up questions – how do I go about preventing a cyber-attack from happening to me and is any of this covered by insurance?
While awareness is the first step to prevention, addressing the exposures is more valuable. Since much of the content here is a key-point summary of a white paper co-written by Pure Insurance and Concentric Advisors, the best way to address prevention is by giving you access to that white paper:
Cybersmart: Understanding and Managing Cyber Threats to High Net Worth Individuals
Additionally, Concentric Advisors (co-authors of the white paper) offers a website that, after answering a few questions, will give you an idea of the security level of your network:
How Secure is your Network? Guide to a Secure Network
Unlike commercial insurance, personal insurance coverage for cyber-crime has not evolved as quickly. Your policies will only address a few of the exposures listed above so consult with your agent/adviser for proper guidance, keeping the following coverage in mind:
- Personal Injury - this coverage should be included within your liability limits and covers the non-bodily injury damages that can be alleged by a third party. Examples include libel, slander, defamation, and invasion of privacy – all of which can be a part of cyber-bullying allegations.
- Identity Theft - pays the full cost to restore your credit record and personal identity with limits ranging from $5,000 to $100,000.
- Financial Loss - pays in the event of unauthorized use of your credit card or an unauthorized electronic transfer from your bank to another asset account, with limits ranging from $1,000 to $100,000.
Coverage via a personal insurance policy is still being developed, varies greatly by company, and is deficient relative to the exposures outlined above – which reinforces the ounce of prevention adage.
Cyber-crime is as old as the Internet and more lucrative than the illegal drug trade, with a much lower risk of getting caught.
The primary motivation for cyber-crime is monetary gain. The affluent have greater financial means and more entry points into their networks, as the above examples support. This combination makes the affluent more likely targets.
The first link above will take you to the white paper titled, "Cybersmart: Understanding and Managing Cyber Threats to High Net Worth Individuals"
The second link allows you to measure the security level of your network.
Because personal insurance coverage hasn't kept up with cyber exposures, an ounce of prevention is worth a pound of cure.
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