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Computer hackers stealing customers’ credit card information are no longer just a threat to traditional technology and Internet companies. ChoicePoint, Polo Ralph Lauren and LexisNexis have captured headlines recently as victims of credit card theft. They’re among the thousands of companies at risk from hackers breaking into their computer systems to take and abuse customers’ personal information.

These d

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

ays, every company doing business over the Internet is at risk, whether the company is a huge software maker, a bricks-and-mortar retailer with a dot-com presence or a tiny retailer selling specialty crafts online.

All businesses have private, critical information that’s at risk. It could be anything from patents on intellectual property to customer social security numbers.

Unfortunately for these compan

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

es – and their customers – many digital losses are not covered under traditional corporate insurance policies. Commercial general liability policies - in particular the personal injury and advertising injury coverages - now offer very limited coverage for many of the risks emerging from the widespread use of the Internet for commerce. In addition, policies covering damage to your own property, vandalism,

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

business interruption, and dishonesty focus on tangible property but offer little protection for malicious programming (viruses) and for intellectual property – significant exposures for many companies. These policies typically offer very limited coverage for loss of computer data, regardless of how catastrophic or debilitating the loss.

This leaves companies victimized by computer losses open to substan

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

ial financial damages – and the exposures are growing every day. Realizing this, a number of companies are seeking protection through a type of coverage loosely referred to as “cyber insurance.” This insurance line has emerged over the past several years as a way for companies to hedge against lawsuits from customers whose personal information is stolen – or other lawsuits from customers alleging financial

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

harm from misuse of digital information.

Let’s look at two examples:

1. Fictional web site design firm “Web Design,” which has 100 employees and $40 million in annual sales. Fictional client “Widget World” hires Web Design to design a Web site to sell products. In addition, Web Design creates a customized order package for Widget World to take orders online. The ordering software assesses tax on orders.

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

Unfortunately, Widget World later learns it is not authorized to collect the tax and must refund the money to customers. The cost to Widget World is $250,000, which they decide to recover by suing Web Design. If that weren’t enough, a Widget World competitor sues Widget World, claiming its website looks too similar to the competitor’s Web site. Widget World then sues Web Design for trademark infringement.

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

his used to be covered under Web Design’s general liability policy but now excludes it. Cyber insurance typically provides this coverage.

2. Fictional retailer decides to offer products to customers online with payment by credit card as an option. A hacker breaks through the security and obtains and sells private information on the credit cards and social security numbers of 300,000 customers. The reta

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

ler notifies its customers of the security breach, but is exposed to claims from customers for unauthorized use of their credit cards as well as potential identity theft. Traditional policies exclude this but coverage can be bought back through certain kinds of cyber insurance.

Within the computer security industry, cyber insurance is gaining interest. A panel discussed it at the February 2005 RSA Confer

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

nce and Expo, a leading security conference, in San Francisco. Many insurance companies now offer cyber insurance in one form or another. The coverage is evolving and pricing is improving as more companies express interest in the coverage and the industry sorts through new computer threats and the best ways to protect against them.

Insurance companies offer varied products that protect against different

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

inds of threats or losses, including:

Copyright and trademark infringement
Misuse of intellectual property
Negligent acts, errors, or omissions
Failure to perform, breach of warranty or representation
Libel, slander
Invasion of privacy
Denial of service or unauthorized access to, use of or introduction of malicious codes into data, soft

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

are, systems or networks

Although cyber insurance has been available for the past four or five years, many larger companies choose to self-insure this exposure. However, as it has become more affordable and the coverage has evolved, even some of the largest firms in this area have taken advantage of it.

Premiums also vary based on the type of company being insured. A technology company, whos

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

core business involves computers and the Internet, will pay more for cyber insurance than a company that only does 5 percent of its business over the Internet. For technology companies, the premiums are high in relation to other coverages. For example, cyber insurance may cost as much as 2.5 times the premium for directors and officers liability insurance and 25 times as much as general liability coverag

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

for a small to mid-size technology company. It may be hard for such a company to swallow the relatively high cost of cyber insurance. But if the firm doesn’t buy it, it could be gambling the entire company. If someone hacks into the company’s computer system and misuses the information stored there, it could be potentially devastating.

The process of obtaining cyber insurance offers other benefits. Bef

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

re an insurance company grants coverage for cyber exposures, it often works with the company to assess the risk and evaluate controls, including security measures in place to avoid or mitigate losses. This can identify vulnerable areas and the need for improved controls. Insurers also work with the company to make sure the company is prepared to respond promptly to problems, contain losses and keep them

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

rom escalating, and finally, to pay claims from a catastrophic event. The priorities are loss prevention, claim mitigation, and loss payment.

Companies who want cyber insurance will have to prove they:

Have a formal privacy policy in place
Have a policy governing whether and how they will sell or disseminate personal information
Will be responsible for personal data such as

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

health and financial information

Have intellectual property rights clearance procedures for new and current employees

Have a formal policy on how to respond to security breaches and other complaints, in addition to inaccurate, defamatory or troublesome content

Have policies in place to protect users of chatrooms and bulletin boards

Have a security plan and protocols

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

n place that are updated routinely

Have hired hackers to try to breach their security

Are ensuring the quality of their products and that they comply with standards, maintain documents, have a customer notification plan, and a plan to recall and fix products

Have planned for worst-case scenarios

Higher deductibles for cyber insurance are common. It’s important th

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

t the company being insured has some “skin in the game” so they’ll help control the risk and keep losses from happening.

Overall, having cyber insurance is part of a company’s entire risk management effort, also known as “enterprise risk management.” This involves looking at the business comprehensively and strategically to determine what can threaten a company’s survival. Cyber-related losses could be s

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

extraordinary that they would fall into this category. If a company does any significant portion of its business over the Internet – which includes selling products or services, communicating with employees or customers and exchanging information – it could be exposed to problems from people who want to cause havoc or harm.

For these companies, cyber insurance offers tools for managing their digital risk

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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