Spurred by the lure of low cost, the unregulated and unprotected Internet–based telephone services are expected to produce major insurance losses according to a report issued by NJ-based telephone technology development and licensing company, Emerson Development.

The report, “VoIP Security Review: Insurance”, states that the discount VoIP telephone service, which is rapidly being adopted in the U.S. and throughout the world, is causing a shift from the reliable, secure traditional telephone network now in use, to an Internet environment of extreme risk.

As it becomes more prevalent, the report anticipates that VoIP will be increasingly attractive to those with malicious intent, and therefore will be progressively more vulnerable to hostile acts such as spying / espionage, hacking, intrusion, identity and intellectual property theft, and interruption of service. It points out that VoIP is exposed to all the cyber-risks of the Internet, plus unique risks related to voice communications such as eavesdropping on and recording of phone calls, or redirecting calls to an imposter organization (e.g., a hacker instead of a bank).

This is significant to the Insurance Industry because a growing range of insured user sectors are depending upon VoIP online telephone service. These sectors include, but are not limited to government, the military, manufacturers, the legal profession, the banking industry, the transportation sector, hospitals, pharmaceutical companies and medical practices, the not-for-profit sector, and private individuals in greater and greater numbers.

“Because of the Internet’s open architecture, every person and every system has direct access to one another,” the report’s primary author and CEO of Emerson Development, Mr. Harry Emerson states, “therefore,” he continues, “we all implicitly have a trusted relationship with every hacker and terrorist in the world”. This fundamental Internet architecture, the report explains, enables the broad range of cyber-security threats experienced today; VoIP, as an Internet application, has the same unavoidable vulnerabilities.

According to FBI Director Robert Mueller, in an April 23rd release, “The FBI considers the cyber threat against our nation to be one of the greatest concerns of the 21st century.”

Report co-author, risk-management expert Mr. Glenn Tippy, President and Managing Partner of Insurance Agency Gerrity, Baker, Williams Inc., anticipates that insurance carriers will increasingly price for Internet / VoIP telephone exposure. “Cyber insurance products will be created for users of VoIP, as well as for VoIP providers and vendors. The effects upon our economy will be profound,” he said.