by Peter Schlactus, CIC, AAI                                                  [ Back To Table of Contents ]

In addition to possible damage or destruction of expensive and fragile computer equipment, several new areas of risk deserve your 
attention: data loss, electrical surges, magnetic erasure, viral infection, security breach and carpal tunnel syndrome.

Computers have given us a whole new vocabulary of disaster.

Different Strategies

As with any business risk, insurance is but one of several risk management strategies available to courier managers. The only fool-
proof strategy is risk avoidance, but few couriers can afford to remain computer-free: Loss control techniques focus on decreasing 
the frequency and severity of problems that may occur. These techniques will be reviewed later in this article.

You may also transfer risk to others. Insurance is the most common method, but not the only one. Computer service contracts are 
one sensible form of non-insurance risk transfer. For a fixed price, another company assumes the responsibilities and costs of repairs 
to your system.

Computer Insurance: The Problem

Most of us assume that our office insurance policies protect our computer system. And technically that's true -- it's just that these 
policies don't always protect our systems well.

Office policies fall short in at least two ways. First, they rarely provide enough protection to recreate lost data and proprietary software. 
Most policies contain an exclusion similar to the following. Property Not Covered: ...The cost to research, replace or restore the 
information on valuable papers and records, including those which exist on electronic or magnetic media, except as provided in the 
Coverage Extensions.

The Coverage Extension limits coverage to $1000 per location, hardly enough for most courier companies. Otherwise, your policy will 
pay only "the cost of blank materials," such as floppy disks and tapes.

By purchasing specialized additional insurance for "Valuable Papers & Records" and "Accounts Receivable," most company owners 
can overcome the above problems.

The second shortcoming of office insurance policies, however, poses a more difficult problem.

Simply stated, these policies generally do not provide coverage for the things that most often damage and destroy computer equipment: 
electrical surges, mechanical breakdown, computer viruses, and more. The industry's most encompassing standard policy, the "Special 
Form" specifically excludes coverage for losses caused by:

l. The failure of power (if the problem is off-premises).

2. Artificially generated electric current, including electric arcing, that disturbs electrical devices.

3. Dampness or dryness of atmosphere [or] changes in temperature.

3. Mechanical breakdown.

4. Acts or decision.., of any person (i.e. the 'accidental erasure' exclusion).

As if this isn't bad enough, what little coverage there is for valuable papers and records only applies to a limited list of 14 "specified 
causes of loss."

Theft, for example, is not covered.

Computer Insurance: The Solution

How can you protect yourself? For one thing, not all insurance companies use standard policies. Some of the better ones have 
designed broader policies that remove many or all of the exclusions listed above. A few even add protection against computer virus 
losses. Of course the only way to know for sure is to sit down with your insurance broker or request a letter outlining coverage.

An alternative is separate computer insurance, usually called "Electronic Data Processing" (EDP) insurance. Some insurance companies 
actually specialize in such policies, which usually cover most computer risks. Be careful, however, because they are not as regulated or 
standardized as office policies. You really cannot be sure of what you are buying unless you read the policy.

The good news is that computer coverage is relatively inexpensive. The small additional investment will seem like the deal of the 
century if you are unfortunate enough to have a serious computer loss.

One final tip -- make sure to give yourself "Extra Expense" protection in the event of a computer loss. Emergency equipment rentals, 
rewiring, overtime, etc. can add up quickly and may not be covered unless you specifically request it.

Contact your broker to check if you have the best protection available.

Health Risks

Computers put more at risk than equipment and data. There are human health risks as well. Carpal tunnel syndrome is a well documented 
affliction of computer users, and the dangers of computer monitor radiation are widely debated. While it may be true that computers do 
not pose the same hazard as forklifts, they can still injure and disable employees and owners.

Health, disability and workers' compensation insurance all play a part in managing these human risks. Currently, most insurers recognize 
and cover computer related injuries and conditions, but it is wise to consult your broker to determine how your policies protect you.

Of course, most courier owners would prefer to prevent injuries and their consequent workers' compensation claims. To help prevent 
carpal tunnel syndrome, New York's State Insurance Fund recommends the following loss control practices:

1. Encourage the use of correct typing position, with wrists held up and straight, and arms bent at a right angle.

2. Have typists sit up straight without leaning in.

3. Occasionally roll shoulders to release tension, stretch your arms in front of you with fingers laced, and gently shake out your wrists 
from side to side.

4. Build up muscles in the affected areas with daily exercises.

Loss Control Techniques

As with health risks, you can reduce or limit loss of equipment and data by instituting a sensible loss control plan. Many people 
view electronic equipment as mysterious and quirky, but you can avoid or minimize many problems with some basic preventative 
measures.

Back up your data. A recent insurance journal article on computer losses concluded, "If there were ten commandments for 
protecting computer data, this would be one through five."

You can't back up information enough. Our office backs up data every evening after hours and uses a different back up tape 
for each day of the week. We take home the previous day's tape to limit our potential loss to one day of data.

Fire-proof safes are a distant second-best. As with any critical function, data back up should be the clear responsibility of a 
specific person.

One final word; data back up is not a perfect solution. Our office almost lost three months of data once when we belatedly 
discovered a problem with our back up software!

Plan for disasters. Couriers do not have the luxury of hanging out a sign that reads, "Closed two weeks for repairs." If your 
customers cannot reach you and get the rush service they expect, they will go elsewhere --and many will not come back. Even 
the smallest courier company should have a technology disaster plan in case the building burns down or a line surge damages 
your system.

Where can you get replacement equipment fastest? Do you have a spare set of software programs stored off premises? Who 
will reload your data? How will you communicate with your customers?

For assistance in formulating your plan, consult your professional insurance agent or a risk management specialist.

Scan for viruses. Computer viruses are mini-programs that hide themselves on computer systems and disks with unpredictable 
and sometimes disastrous consequences. Computer stores sell anti-virus programs. While these do not provide complete security, 
every computer system should have them. Also, be sure to scan all computer disks for viruses before using them.

Bob Janacek, technical director of Safetynet, a computer security firm in Springfield, NJ, offers a tip that he says will prevent four 
out of' five virus accidents. Set up the computer so that it can boot from the hard drive only. Eighty percent of viruses are caused 
by starting a PC from an infected disk.

Get wired right. Check that the cabling, wiring and telephone lines are the correct grade for your system, and protect yourself 
against surges. A bolt of lightning -- even if it doesn't hit your lines directly, and even if your equipment is turned off-- can induce 
powerful currents that wreak havoc on your electronic equipment.

Most major surge suppressers function well and start at about $25. A gas-discharge protector at the point where your phone line 
enters your office may be easier and more effective than adding suppressers for each piece of equipment. Consult your system 
installer. Consider investing in an uninterruptable power source to protect yourself from power outages.

Guard against static and magnets. Read your manual to familiarize yourself with these and other common hazards. If the air in 
your office is dry, buy non-static floor mats because static can damage your computer equipment and cause PCs to freeze up. 
Another anti-static trick is to spray a mist of fabric softener diluted in water around (not on) the computer.

It takes a magnet only a second of exposure to erase an entire disk. Throw out desk accessories, like copy holders and paper clip 
trays, that are magnetized.

The simple rule is to be thorough but practical. Be sure to do something about data back ups, disaster plans, viruses and the like -- 
but avoid overly complex measures that will not be followed. Don't hesitate to bring in a professional, such as your insurance broker -- 
your business's survival may be at stake.

At least inform your broker about the steps you are taking, as he or she may be able to upgrade your coverage or obtain a discount 
as a result.

Computers may be worth the risks they bring, but they do bring risks -- serious ones -- that can and should be addressed by every 
courier company. With preventative measures, proper insurance protection and a contingency plan, you can relax and let the 
computer's potential revolutionize your business. 

^{Peter Schlactus, a Certified Insurance Counselor and  Accredited Advisor in Insurance, is Co-President of KBS International Corp., which provides specialized  insurance programs, benefits, and  risk management services to courier companies and executives nationwide. Mr. Schlactus is available to answer inquiries  at 1-888-KBS-4321 or via e-mail at peter@courierinsurance.com.}

^{COURIER MAGAZINE - July/September 1996}        [ Back To Table of Contents ]