New Insurance Covers Data Theft

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Ron D'Alessandro, vice president of marketing at insurance broker A.C. Edwards Inc., and mailing industry consultant Chuck Polle created a program this month to protect mailers with insurance that safeguards lists against costs caused by loss of privacy, infringement and corruption of data.


The coverage extends to repay and repair damages caused by external break-in, especially via unauthorized online access. It also covers internal theft of data from a mailer's facility during the mailing process. Houston Casualty, Houston, provides the insurance.


"Certification and data protection insurance is the only way to demonstrate that every effort has been made to protect the millions of names that pass through the average lettershop," D'Alessandro said from Sayville, NY. "This program offers both the lettershop and their clients an effective way to offset any costs if anything goes wrong and to defray the costs of potential litigation."


To qualify for the data protection insurance (www.acedwardsinc.com), a mailer's facility and computer system undergo a thorough third-party security analysis conducted by a certified data security auditor.


The audit analyzes 182 items in 13 distinct groups of data security. Mailers who qualify receive a letter of certification and a security reporting score. Both documents are required to buy the insurance.


Coverage is available up to $5 million. The final security score, the type of services offered by the mailer and the mailer's annual revenue determine the premium payments.


Banks, credit card firms, nonprofits and securities brokers often now seek contractual indemnification from their mailers. This insurance was designed to serve that need.


Buyers of the insurance include firms that use direct mail plants, as well as mailers and lettershops to protect their clients' data. List brokers and managers also may benefit to ensure the lettershops that receive their lists meet technology standards to keep the lists secure.


"In the current climate of damaging identity theft, we all need to seek new ways to secure sensitive data," Polle said. "This new insurance provides the direct mail and graphic arts industry with a way to offer a safe and secure mailing -- much better than simply crossing your fingers."


Precision Marketing Concepts, a full-service direct mail plant in New York, invested in the test phase of this program. It is the first facility nationwide to qualify for coverage and is offering it for free to clients.


As explained by Precision Marketing chairman emeritus Jim Ribellino, the increased incidence of data theft has raised several issues. First, present clients demand proof of security for their mailing lists. Next, new clients will do business only with data-secure and data-insured lettershops. Finally, the threat of substantial and complex damages looms.


The new data protection insurance does not replace anything, but augments everything, Ribellino said.


"In the past, we've relied upon traditional 'errors and omissions policies' to protect our clients from any difficulties in the mailing process," he said. "However, these contracts do not respond to the perils associated with cyberspace theft or corruption of data and privacy.


"It convinces present and future clients of our goal for a secure environment for one of their most valuable assets: their mailing lists. Coverage protects us from the possibility of uninsured damages from obligations that we contractually have been asked to assume, perils not previously addressed by other policies."


Mickey Alam Khan covers Internet marketing campaigns and e-commerce, agency news as well as circulation for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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