Bob Childress, CEO of Solace Insurance, was recently interviewed by Money Radio KFNN on the importance of cyber coverage for small- to- medium-sized enterprises in the wake of the Target breach.
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Interviewer: Let’s go to the phone and say good morning to Bob Childress, who is the CEO of Solace Insurance. Good morning, Bob.
Mr. Childress: Good morning.
Interviewer: You’re in the Tampa, Florida area there, and you’ve been dealing in insurance for a long time, and I’m sure you looked at the Target story, an ongoing story, with a great deal of interest.
Mr. Childress: Absolutely.
Interviewer: Now, this is a big company, Target, but there are a lot of small- or medium-sized companies out there that should have some concerns because they … Well, first of all, I guess they can’t afford the kind of security that Target didn’t have, and also in dealing with the lawsuits and all that sort of stuff they’re very vulnerable, aren’t they?
Mr. Childress: Yeah, absolutely. It’s the medium and small businesses don’t have the financial resources like a Target would, and so they’re actually more vulnerable and what the criminals are going after even more so.
Interviewer: Now, does your insurance company provides some kind of cyber insurance for these companies?
Mr. Childress: Yeah, the cyber liability is a great way and really at this point an inexpensive way for medium and small businesses to mitigate those risks that are posed, not just from the criminals that we see in the news today but also from internal sources, people stealing data from within their own ranks.
Interviewer: Ooh, we hate to think that would happen, but you know that it certainly does. When you say mitigate, give us an example of what you’re talking about. How much coverage can we get in this case?
Mr. Childress: You know, with each company it’s going to be different, and they need to assess what their maximum exposure is. My understanding from my research is that Target had over $100 million of cyber liability to protect them. That’s not something that a medium or small business is going to be able to afford to cover those losses. But when it comes to the cyber liability and making sure that they cover all the things that Target is now having to pay for, you know, like the credit checks and reimbursements for any of the fraud that’s going on, the critical PR, there’s all kinds of things that people don’t think about that that cyber liability is going to pick up. And quite honestly, without that coverage there’s a lot of businesses that have been around for a long time that would not be around after a cyber attack just because of their inability to regain that good will from the customer base.
Interviewer: Very good point. Now, Target, of course, has some pretty deep pockets; but as you said, when you get to some of these smaller companies that might not be in that situation, you could put them right out of business with this.
Mr. Childress: Absolutely. You know, and they are targeting these small businesses. Earlier in 2013 there was a large grocery store chain, multiple grocery store chains that were attacked, and they just don’t have that type of technology or resources to keep up with that. And the criminals are always one step ahead, so having that type of protection is absolutely important for them to… for the sustainable of future plans.
Interviewer: Bob Childress, CEO of Solace Insurance joining us this morning. Now, just anecdotally I’ve heard a lot of people say, “You know what, I’m not going into Target anymore,” so you also have the reputation of the company to deal with when something like this happens.
Mr. Childress: Absolutely, and I think, you know, people, a lot of people do not take, you know, a PR type of approach with their companies, but when something like this happens, they have to; and not being aware of what critical PR may cost them to regain that public trust, it just becomes unaffordable to those small and medium businesses along with all the repair that they have to do in fixing their data and customer notifications and any fines that they get from the breach of the consumer laws. There’s a lot of things for that business center to consider.
Interviewer: So what you were saying is that all companies, small- or medium-sized companies, should have some sort of cyber security policy in place.
Mr. Childress: It should be a staple just like workmen’s comp or the general liability or the commercial auto insurance. It needs to be that important to them. It’s something that has not been available in years past and is really starting to hit the heights, especially with big news like Target coming out and Macy’s, a few others that have been in the news as of late. It’s hopefully bringing awareness that these business centers can realize that if it can happen to Target, it can also happen to them.
Interviewer 2: You know, I wonder what about liability for the credit card companies. Do we need to have some rules for them? Do we need to improve the technology and force them to do this? Because they don’t seem to be taking a hit here at all.
Mr. Childress: Well, you know, they don’t have a name that the credit… that the public is aware of, so I think more the focus is being put on the retailer, but absolutely those guidelines are applicable to those processors and that more stringent rules need to apply to them as well. You’re absolutely correct.
Interviewer: You talked about PR. Do you think Target—and of course they are the target here—do you think they handled their post cyber attack effectively?
Mr. Childress: You know, I absolutely do. I think that they were very quick to get it out into the press and to handle their issue. They didn’t try to skirt around it. Some companies make that mistake, and I think that is something that the public just doesn’t trust, and so I think they made the right move. They took the hit right up front, and now they’re doing what it takes to repair that. I’ve seen that with other large chains where they hit it immediately; they showed the consumer that it wasn’t their fault, but they’re going to take ownership; and they moved swiftly to put everyone back into their comfort level of doing business with them. I think they did exactly what they should have done.
Interviewer: Are you seeing more of this kind of activity getting these kind of policies at your company?
Mr. Childress: Absolutely. The increase for cyber liability policies is growing quite rapidly, and there’s a lot of carriers, insurance carriers, that didn’t used to sell it but now are, so I think we’re going to see it be more competitive and more options to the consumer, the business owner that’s buying that; but only time will tell in terms of what kind of claims that we see, that once we start getting those medium and small businesses who didn’t have the coverage before so we didn’t really hear about the claims, I think there’s a lot more claims than we really know about.
Interviewer: All right. Bob Childress, CEO of Solace Insurance in the Tampa Bay area, thank you so much for being on our show this morning.
Mr. Childress: Thank you, guys. Have a great day.