The Hartford Study Finds Small Businesses in the Dark About eCommerce

Love Bug-type viruses. Lawsuits for privacy violations. For small and mid-sized companies venturing onto the Internet, the world of cyberspace can be fraught with pitfalls.

Compounding the problem is that few small and mid-sized companies know whether they are adequately protected against cyber-risks, says The Hartford Financial Services Group, one of the nation’s leading business insurers.

The company recently conducted a study that found 80 percent of small and mid- sized businesses were not sure whether their current insurance policy covered such specific cyber-risks as e-mail viruses, web site business interruption, online copyright infringement and Internet privacy.

The national study, believed to be the first of its kind to focus on smaller businesses, surveyed 282 companies with fewer than 500 employees who currently utilize the Internet but not as their primary revenue generator. An independent online market research firm conducted the study on behalf of The Hartford.

“This uncertainty is not surprising,” said Judy Blades, executive vice president in charge of business insurance at The Hartford. “Most standard business coverages were established before the Internet became a common business tool. It has only been in recent years that problems associated with the World Wide Web have come to the forefront. For example, businesses have lost their customer databases from e-mail viruses or have been sued for posting copyrighted material on their web site. These findings underscore the need for carriers to clarify their coverages in these areas.”

The Hartford study found that nearly all the companies surveyed were using the Internet for e-mail and web surfing. Some 68 percent of mid-sized business and 42 percent of small business had web sites for informational purposes.

While just 13 percent were currently using the Internet for e- commerce activities, a total of 47 percent expected to do so within the next three years. When asked about the greatest cyber threat to business, those surveyed put e-mail viruses at the top of the list.

“This reflects the reality of Internet communication,” said Blades.

According to the International Computer Security Association, the likelihood of a company experiencing a computer virus has approximately doubled for each of the past five years. ICSA reports the median downtime for a virus disaster – defined as 25 or more PCs or servers infected at the same time — was 21 hours in 2000, a dramatic increase from an hour or less the year before.

Of the small and mid-sized businesses surveyed by The Hartford, the more cyber-savvy ones were particularly worried about lawsuits involving online copyright infringement and privacy. According to attorneys who specialize in this type of litigation, defense costs alone for these cases can exceed $100,000. The Hartford study also found that companies whose web sites have interactive and transactional capabilities were generally twice as likely to be concerned about these issues as firms whose web sites were promotional in purpose only.

Businesses utilizing the Internet should clarify with their insurance providers the extent to which they are covered for specific exposures.

“The last thing you want is to be facing a $200,000 lawsuit and then find out that your policy doesn’t cover your web site,” said Blades. “Companies should talk to their independent insurance agent about their current and future online activities to make sure they have the appropriate coverage.”