Cyberwar highlights risk to online companies

By PETER GRIFFIN technology writer

Clear signs that New Zealand websites have been drawn into the bitter tit-for-tat cyberwar between US and Chinese hackers have sent a warning to online businesses that drops in service levels can have serious financial consequences.

Customers of internet service provider Asia Online - including the Ministry of Health, advertising firm Colenso and Carter Holt Harvey - suffered a reduction in internet services after the ISP was hit by a series of denial of service attacks.

While several of Asia Online's major customers were able to fall back on service arrangements with other internet service providers, smaller business customers and home internet users were unable to send e-mails or access the internet.

Asia Online general manager Kevin Francis said last night that the attacks could result in a commercial loss for the ISP and that one customer had already approached the company about receiving a rebate.

"That kind of approach is reasonable if we've broken a service level agreement with a customer," hesaid.

Mr Francis said his customers had been understanding about the disruptions to services caused by the attacks, but he welcomed recent moves by companies to protect online businesses such as ISPs against commercial losses from such attacks.

"There's room in the market for insurance against this type of loss."

Two United States companies have recently entered the New Zealand market offering policies tailored to businesses trading online - an area that the dominant local insurers have approached with caution.

Infamous attacks on internet services, such as the Love Bug computer virus, reportedly cost companies billions of dollars, but many found their insurers would not cover their lost earnings.

Minnesota-based St Paul is offering IT liability cover called Techsure as American International Group (AIG) is launching its NetAdvantage and ProTech policies.

The companies claim their policies cover a range of potentially expensive internet disasters - from technology glitches, defamation and copyright infringements through to virus transmission, hacking and denial-of-service attacks.

Greater protection is also on the horizon for companies participating in e-commerce.

In March, Clear Communications said that it would move to protect the risks of e-commerce by offering insurance packages to companies.

The telecommunications provider is working with international insurance broker Willis to provide risk assessment services.

Services provided by Clear in conjunction with Willis include merchant transaction insurance, intended to reduce risk in the case of credit card fraud.

It will also offer internet liability insurance to protect against online risks such as copyright infringement, defamation and the unintentional transmission of a computer virus.