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Computerworld - A small but growing number of companies are looking to buy insurance that would provide financial relief in the event of a data security breach caused by cyberattack or digital terrorism.

Let's say a hacker broke into your company's networks and accessed reams of sensitive customer account data. Would your company be covered under its general liability insurance? Probably not.

Three or four years ago, there were a lot more gray areas as to whether information security was covered under general corporate liability policies, says Emily Freeman, a security consultant at AIG eBusiness Risk Solutions in San Francisco, an American International Group Inc. (AIG) division.

Computer and data security "wasn't affirmatively covered, but it wasn't excluded either. But now, the drift is for exclusion," says Freeman. As a result, financial services companies, retailers, hotels, travel-related businesses and technology companies are showing strong interest in data security insurance.

Commercial insurers such as AIG, Zurich North America Insurance Co. and The Chubb Corp. are responding with customized cybersecurity policies based on individual companies' exposure to risk.

Better Policies

Initial security policies that were available a few years ago "had high fees, and they weren't selling well," says Scott Charney, chief security strategist at Microsoft Corp. But over the past few years, he says, insurers "have become more savvy in crafting e-policies," even though the amount of business they're booking "is still relatively small," he adds. AIG has 2,000 network security insurance customers and roughly 70% of the global market, Freeman claims.

But IT and business managers should be aware that potentially crippling worms and viruses like the recent Slammer virus typically aren't covered under these newer data security insurance policies.

Why not? Consider the following analogy: Companies can buy fire insurance for 20 buildings in one city because the chance of a fire sweeping through all of the facilities at the same time is pretty remote, says Alan Paller, director of the SANS Institute in Bethesda, Md., a research organization for security managers and systems administrators. "But the rules for viruses are completely different—they can affect everyone," he says. Therefore, insurers typically either won't provide general liability coverage against worms and viruses or will offer only extremely limited property coverage, says Freeman.

Outside of the financial services industry, where electronic transactions with customers are an integral business component and high levels of security are critical, few CIOs and chief security officers are aware of the need for cybersecurity insurance, and senior managers rarely seek their advice when they are considering the company's insurance needs. "We haven't done any work on this yet, but there's a slow groundswell among some companies to begin taking actions on these issues," says RA Vernon, vice president and CIO at Reuters America Inc., which provides information to Wall Street brokerages and the financial services industry.