Protecting customers from identity theft

Identity theft can have devastating financial and psychological consequences. When thieves make purchases, empty bank accounts, or take out loans under other people’s names, it can take months, or even years, for those who are victimized to restore their good credit.

Less well known is the catastrophic effect of identity theft on businesses that fail to adequately protect confidential data. “Losing” a customer’s data can result in litigation or fines, and it may irreparably damage a company’s reputation if a data breach is made public. Smaller companies, in particular, are at risk for identity theft, while larger companies have become more adept at warding off hackers and other thieves.

Here are some of the precautions you, as a business owner, can take to reduce the risk of sensitive customer data falling into the wrong hands:

• Minimize the amount and type of information collected. The theft of Social Security numbers can be particularly detrimental to individuals, so companies should use other means of identifying customers, whenever possible. However, even less sensitive information, such as phone numbers and birth dates, can also be tempting to thieves.
• Conduct all electronic transactions through authentication systems with security designed to verify that the user who accesses an account or provides information is legitimate.
• Establish a privacy policy with specific rules on the handling of customer data. Train all employees with access to customer data on these procedures.
• Restrict employee access. Authorize employees to view or handle data on a “need-to-know” basis. There are software programs available that allow you to monitor who is accessing data at any given point in time; store this information in case an audit becomes necessary. If an employee leaves the company, access to the company’s databases should be withdrawn immediately.
• Remind employees that phone conversations can be overheard and computer screens can be viewed by unauthorized individuals. Encourage employees to use discretion when discussing confidential information and to lock their computers when they are away from their desks.
• Protect your computer network with firewalls that create a protective barrier between your company’s network and the Internet. Available as either software or hardware, firewalls can stop potential hackers from gaining access to confidential information stored in your system.
• Use encryption when exchanging sensitive information with customers via a website or e-mail, and encrypt confidential customer data stored on servers and backup systems. Encryption software scrambles data during Internet transit, making it difficult for hackers to intercept and steal information.
• Install antivirus and anti-spyware software on all company computers. Be sure the software includes automatic updates. As an extra precaution, remind employees not to open e-mail from unfamiliar addresses.
• Store information in the most secure location possible, and properly dispose of old records. If it is not necessary to keep customer information online, store it offline in file cabinets, under lock and key. Avoid storing confidential data on discs or CD-ROMs. Hard copies of records containing sensitive information should be shredded when no longer needed.
• Protect hardware from tampering or theft. Thieves can tap into sensitive data stored on servers, hard drives, and notebooks if they find or steal the equipment. Notebooks containing sensitive customer information should not be taken outside the company, unless it is necessary to do so. Before disposing of old computer equipment, businesses should run hard-drive shredding software.
• Include as little personal information as possible in written correspondence to customers, as thieves can steal Social Security and account numbers by intercepting mail.

If a data breach occurs, prompt action will be required. Suspend the compromised accounts immediately, and shut down the systems containing the data to prevent additional theft. Notify the police and the FBI of the breach, as well as any customers who might be affected. Your company’s security systems will require thorough analysis to establish how the breach occurred, and steps must be taken to prevent future losses.

Workers compensation: a time-honored benefit

Workers compensation has interesting roots. While you might think the concept originated during the industrial revolution of the late 18^th and early 19^th centuries, it actually dates back to the 17^th century on the high seas.

The life of a pirate was a hazardous one. Before crew members received their share of the booty, a special distribution was made to comrades who had been injured in action. The loss of the right arm was considered most serious, leading to an award of 600 gold coins. The left arm was considered less valuable, resulting in 400 gold coins. Ironically, there was no provision for the loss of a hand because a pirate with a hook for a hand was considered more valuable with his combination tool and weapon!

Into the Modern Age

With the advent of industrialization and the resulting increase in machinery-related injuries, workers compensation became formalized. The first laws were instituted in Germany in the 1880s, followed soon afterward in England and then in the United States, where Wisconsin enacted the first state workers compensation law in 1911. Today, workers compensation law in the United States is considerably more sophisticated.

State statutes define workers compensation. Therefore, laws differ from one state to another. The object of a compensation law is to substitute the common-law rights of a covered employee (i.e., the ability to sue) against his or her employer with a legal remedy that requires the employer to pay benefits according to the applicable state statute.

Most state compensation laws prohibit lawsuits by employees against their employers. However, there may be exceptions. Two of the more common exceptions are intentional harm, such as an injury arising from a safety violation, and bad faith arising from harassment of an employee during the claims process.

Who Benefits?

Workers compensation is the legal recognition that when an employee sustains a work-related injury, the employer is obligated to pay for medical expenses, temporary and permanent disability benefits, rehabilitation benefits, and survivors benefits in the event of death.

State workers compensation statutes cover most employees within that state. Federal statutes limit coverage to Federal employees or those employed in a significant aspect of interstate commerce.

Under a typical state statute, the employee is guaranteed workers compensation benefits on a timely basis. With a common-law remedy, the injured worker could be subject to the delays and expense of litigation. Consequently, the injured worker may not receive compensation until a court makes an award or the case is settled. In turn, the employer is protected from open-ended financial losses associated with employee injuries, which could be substantial if employer negligence were proven in a court of law. The employer controls these potential losses through insurance premiums for workers compensation coverage.

While both parties have relinquished rights under our modern system of workers compensation (the right to a common-law remedy by the employee and the right of due process by the employer), the benefits provided are generally believed to be worth the trade-off. Workers compensation thus protects both the welfare of the employee and the finances of a business.

Weathering the storm: is your business
protected against mother nature?

No matter where your business is located, various forms of severe weather can pose a serious threat to your property. Whether from a hurricane, tornado, flood, or blizzard, inclement weather may leave a trail of widespread damage. Sometimes, the damage to a building and its surrounding property is minor; at other times, it may be catastrophic. In any event, it is important to understand the coverage provided by your property insurance and to inquire about the need for additional insurance, according to the specific risks of your business.

In general, most property insurance will cover damage resulting from common weather occurrences, such as winds associated with thunderstorms, tornadoes, or hurricanes; lightning; hail; and snow, sleet, or ice. Your policy may pay up to specified limits for weather-related losses to your property, including structures; permanently installed fixtures, machinery, and equipment; outdoor fixtures; items you use to maintain or service the building, such as appliances; and additions under construction. However, it is important to note that a peril-specific deductible (windstorm or hurricane, for example) may apply.

Some weather-related risks or natural disasters are often excluded under standard property insurance coverage because they generally affect those in specific geographic locations only. Give us a call to see if separate coverage for any of the following potential hazards is available in your area:

• Earthquakes
• Volcanoes
• Landslides and mudslides
• Tidal waves
• Ocean storms

Another common exclusion from property insurance that can affect all businesses, regardless of geographic location, is damage caused by flooding. To be protected in the event of a flood, you must purchase a separate flood insurance policy through your insurance agent in conjunction with the National Flood Insurance Program. Coverage for non-residential property is available for up to $500,000 for the building and $500,000 for its contents.

Ultimately, it is important to remember that not all property insurance policies are the same; limits and exclusions may apply. To further protect your business from weather-related occurrences, consider obtaining business income insurance, also called business interruption coverage, which is designed to replace the income your business would generate under normal circumstances in the event of a disaster or other covered peril. Should your business be forced to close for a period of time or be incapable of operating at full capacity because of damage resulting from a covered weather incident, this insurance can provide funds to help cover critical expenses and lost profit until the business is up and running again.

We can help you identify the most important areas of property coverage for your business and assist you in updating your property insurance policy, if needed. For more information, contact one of our qualified insurance professionals.