Informational Theft: On the Rise

For the first time in history a recent study conducted by Kroll Annual Global Fraud Report, revealed that theft of informational and electronic data has surpassed physical (intrinsic valued) theft. The study released the following statistics:

The findings reveal that theft of information or assets was reported by 27.3% of companies over the past 12 months, up from 18% in 2009. In contrast, reported incidences of theft of physical assets or stock declined slightly from 28% in 2009 to 27.2% in 2010. ("Kroll")

One of the main factors influencing this rise is that informational data is becoming more and more mobile and few companies have the proper controls in place. How many of your employees have a mobile device, a computer, or access to shared files over your computer network? Companies need to regularly evaluate how they are controlling access to information within their organization to ensure they are keeping pace with technological advancement.

According to the Kroll Annual Global Fraud Report, fraud is becoming more prevalent among inside employees. The companies analyzed in the report show that junior employees and senior management were the most likely perpetrators at 22% each, followed by agents or other intermediaries at 11%. The proportion of fraud carried out by these employees ranged from 50% to 60% in North America. ("Kroll")

Now the question arises: I thought I had coverage under my corporate crime policy?

Unfortunately, most carriers are going to deny coverage pointing first to the employee theft insuring agreement. This agreement refers to covered property as "money", "securities", and "other property". The term "other property" is defined as tangible property other than money and securities having intrinsic value. If the data is printed out then it would be considered tangible, but not if it is located on a flash drive, mobile device, or an electronic file.

There are some cases where the crime policy may respond depending upon the claim scenario and the endorsements included on your crime policy. An example where coverage may be available is if one of your employees is working at a client's facility and your employee steals electronic data that causes a financial loss to your client. It is still uncertain rather or not a carrier will pay the insured who can turn around and indemnify their client, even if electronic data is considered a covered property. The "Clients' Property Endorsement" must be included on the policy for the possibility of a claim payout. The endorsement states "that the insurer will pay for loss of money, securities or other property sustained by the named insured's client resulting from theft committed by an identified employee acting alone or in collusion." ("Malecki")

Recommended Risk Management Procedures:

1. Control Access
2. Conduct Due Diligence of partners, vendors, and employees
3. Be relentless in attacking Intellectual Property Piracy
4. Record Trademarks with the US Customs & Border Protection Agency
5. Purchasing a Cyber Liability Policy

Now is the time to ensure that your company is properly protected from informational and data theft.

References:

Kroll. Information Theft At Global Companies Surpasses All Other Forms of Fraud for First Time. 18 October 2010. http://www.kroll.com/news/releases/index.aspx?id=23082

Malecki, Donald. Rough Notes. November 1, 2002.

Law Banning Texting while Driving

You may have already heard, but I wanted to give you a heads up that Cincinnati has now implemented a ban on texting and accessing the internet on your mobile device while driving. Furthermore, Kentucky implemented a similar law back in July.

As a corporate entity it is imperative that your employees do not text or access the internet while driving on company business. If your employees are using their mobile devices while driving they are not only opening the company (and themselves) up to fines, but are also increasing the risk of auto accidents and negligent entrustment law suits. Have you reviewed your motor safety program recently? Have you implemented the proper procedures?

A few statistics to share:

- 80% of auto accidents are caused by driver distraction within 3 seconds of the event.

- 65% of near accidents are caused by driver distraction.

- Estimates show that 57% of drivers text while operating a motor vehicle.

- A study done by the American Automobile Association found that 46% of teenaged drivers text while driving and that 37% say that texting is extremely or very distracting.

http://news.cincinnati.com/article/20101008/NEWS0108/10090319/Chief-Look-for-texting-drivers