An Ode to the Fake ID: Identity Theft, Data Breach and Cyber Liability

I’ve lived in either Wisconsin or Minnesota my entire life.  However, during different periods in college I actually grew up in Oregon and South Dakota as well.  I couldn’t tell you the names of the towns in either state that I purportedly lived in now, but I sure knew them back then.  I also knew the liquor stores and bars that weren’t real careful when they checked IDs (with the exception of one fateful day when I had to give up my Oregon residency and take up South Dakota).

It seemed in college there was always a guy who could hook you up with a bad fake ID for the right price.  No one was ever hurt while we were out having a good time, and they served their purpose for a few years.  Was it illegal?  Absolutely, and it was also very dumb for a guy majoring in Criminal Justice with full intentions of becoming a peace officer.   I’m not going to talk right now about the importance of training your bouncers, checking IDs or liquor liability.  What I am going to scratch the surface on is the up and coming threat of data breach, identity theft and cyber liability.

While our guy in college may not have been very sophisticated, today’s identity thieves are and have gotten very good at what they do.  It seems just about every week we hear about a large data breach – Target before Christmas and Ebay more recently.  What we don’t often hear about is some of the attacks on small or medium sized businesses.  78% of small and medium sized businesses experienced a data breach in the past two years.  Every year, cybercriminals steal $1 billion from these businesses in the U.S. and Europe.  And of those that suffer a major data loss, 72% shut down within 24 months.

Not all of these data losses were the result of a data breach.  Some were the result of poor backup procedures, but many of them were.  And unfortunately for you, their guy is a lot more sophisticated than our guy was in college.  With our world being more interconnected than ever, there are more and more ways where they can steal your information.  Point of sale computers.  Credit card machines.  Online databases.  Physical breach of confidential records in storage.  Employment records.  Hacking into your computer or mainframe.  Your smart phone.  Online payment systems.  The list goes on.

So how do you fare?  What are your true exposures?  For most people, when they hear data breach they only think of cyber liability.  Cyber liability is very important for many businesses, but it’s also important to understand what your coverage actually entails.  While many businesses may not have a true cyber liability exposure, they still face the possibility that confidential information could be compromised.  It could be by a current employee in good standing.  It could be someone breaking into your business.  Disgruntled employee.  Or it could be someone you know and trust and would never expect.  Regardless of who is a suspect, it is a very real threat to businesses today.

While the cyber liability may not apply in these situations, data breach does and could be used to cover a claim.  It’s important for you to know that coverage is available, it covers a huge exposure, and not all things are created equal.  Even if you do not have the online presence that many businesses do today, you still could fall victim to one of these very sophisticated, 21^st century criminals.  It’s important to know what your policy does and does not cover.

Identity theft is a much more lucrative business than selling fake IDs to college kids, and it’s here to stay.  The best thing you can do is take steps to prevent a breach, and in case it does happen, making sure you have the coverage you need to ensure your business’s survival.  Good luck!

Andy Bertram CPCU, ARM-E
abertram@cobrown.com
651-800-6173