. . . continued from Hot News Risk management consultants do good work for a lot of businesses. But risk management consultants are sometimes unaware that most underwriters outside of California and New York state are prepared to sit down and negotiate data loss insurance. In the U.S., speak directly with ING, Safeco and some other large business insurers. Kickstartnews reviews and podcasts are read and heard not just by large audiences in the U.S. though, but also by audiences in Canada, the UK and most of western Europe as well. Data loss insurance is available on request (with negotiated coverage) in all of those countries. Coverages breakdown into several components, some pre-existing, others representing additions to existing policies. For example, data loss coverage is sometimes negotiated for U.S. and Canadian businesses to cover the cost of data recovery from backups. Data recovery from DLT tape backup systems is often an arduous process which spans many days. A small extra premium paid to increase coverage for general business losses, specifically negotiated to compensate for the 48-72 hours it takes to resurrect a soaked, burned or stolen file server, will benefit a business in many important ways. Note that a business without an effective backup and security system will never be able to negotiate such a premium with its insurer. Values of data (and hence the cost of that portion of the insurance premium) are determined in negotiations based on an estimate of the business losses which take place over a predetermined data restoration period. Also considered is the cost of replacement equipment needed to restore data. In many cases, replacement equipment costs have already been folded into general coverage for losses and theft. For small businesses with limited resources, making use of web backup systems (which essentially store data in typically hardened data centers) will be attractive to underwriters. For the lawyer to whom we specifically referred during the podcast, general coverage should include loss or damage to paper files directly related to the cost of recovery from backups. That means, the cost of the time and effort needed to restore the photocopies of all her records (notes, files, subpoenas, affidavits, depositions, evidentiary statements, invoices, etc., etc., etc.) which should be kept in a secure local rented storage facility (which is also a good place for off-site electronic data backups in addition to her safety deposit box).

A small extra premium paid to increase coverage for general business losses, specifically negotiated to compensate for the 48-72 hours it takes to resurrect a soaked, burned or stolen file server, will benefit a business in many important ways. Note that a business without an effective backup and security system will never be able to negotiate such a premium with its insurer.

In the U.S., insurance coverage and the range of services available to insurance customers varies widely from region to region and state to state — there's no truly comprehensive national baseline coverage model for business. Negotiating various types of coverage can be a difficult and frustrating process. In Canada, almost all coverages are available in all provinces and a baseline model exists. In Canada however, insurers tend to fold all coverages into comprehensive policies which in turn makes those policies very inefficient. In the UK, France, Germany and most other EU nations, insurance coverage availability is uniform throughout each country. Unfortunately, negotiating extra coverages in Europe is a high art form which requires a spectacular amount of patience. In all countries, unusual theft claim activity and data loss/business interruption claim activity is most often met with a jaundiced eye by underwriters, resulting in customers being dumped into facility risk pools and the associated sky-high premiums.

Insurers know that the best defense they have against payouts for business interruption is to negotiate business loss coverage which fully integrates the requirement for exacting and consistently reliable data backup and recovery systems. In many cases, loss claims against such policies are settled at amounts much lower than businesses expect. On the other hand, because the original coverage involved assiduously monitored and managed backup systems, actual loss recovery and restart by the business is much faster than anticipated. Some businesses will be able to get what amounts to data loss coverage, others will not. But as Sallie Goetsch states or implies repeatedly in her blog, real insurance has to take several forms, the most important of which includes rational and unerring daily and weekly data backups.

In the aftermath of Hurricane Katrina, secure electronic and paper data backups are already being used to determine the extent of damage, determine the extent of actual loss, track missing persons, and restart businesses and lives. We can be sure that the squads of insurance claims adjusters wending their way toward Alabama, Louisiana and Mississippi will be able to respond faster to claims supported by accessible data backups.

Back to Hot News!