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E-Commerce can be defined as any traffic that passes in digital form over
wires from one computer system to another, commerce or business over the Internet,
corporate intranet or extranet, and direct-wire connection traffic are all forms of
E-Commerce. Wire services between financial institutions and among businesses, credit card
service providers, and financial institutions; faxes; telecasts; and broadcasting by means
of cable service – these are also forms of E-Commerce. Customers’ access to
their accounts for cash transfers between accounts and bill payments over the Internet is
also E-Commerce. The business opportunities are boundless.
With all of the business
opportunities presented by the Internet come a multitude of risks. These E-Commerce risks
are more complex than traditional risks. The scope of traditional community banking
services is now open to regional, statewide, national and even international exposure.
These services may now lend themselves to risks with multiple consequences, leading to
both first-party losses and third-party liability. The consequences of these risks could
be property damage, damage to data, and time element losses, including business
interruption, contingent business interruption, service interruption and extra expense.
E-Commerce claims do not
necessarily require E-Commerce insurance policies. Some claims will be covered under
traditional insurance policies. However there are some risk exposures inherent to
E-Commerce that are not covered by traditional insurances.
Some E-Commerce related
issues to think about include the following:
- Is a website considered advertising?
- Is there liability for links on your
website to other unrelated business?
- Does D&O coverage apply to suits
against directors and officers for on-line activities?
- Where would Professional Errors &
Omissions coverage kick in?
- Are you covered for failure to secure
confidential information?
- Is there coverage for losses sustained by
individuals or your customers that relied on information that they read on your website?
E-Commerce insurance
policies are not standard, thus coverage varies from policy to policy. Care must be taken
in identifying the bank’s E-Commerce exposure and in purchasing the E-Commerce policy
that best covers the risk to the bank.
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