Does Your Car Insurance Cover Hackers?

By: Liz Taylor, Car Insurance Analyst
CheaperCarInsurance.com

Over one hundred car owners were shocked to find their vehicles disabled or honking uncontrollably in February. Originally, most people figured their car was simply malfunctioning, but police have found the culprit, 20 year old Omar Ramos-Lopez, who hacked into the vehicles’ no-start systems. The question on everyone’s mind now is whether or not hacking is covered by regular car insurance.

The young man was previously an employee of the Texas Auto Center, but had been laid off a few days before the attacks began. While his own account with the company was shut down, Ramos-Lopez accessed the lists of customers through an ex-coworker’s account and began to work his way down the list, activating the systems in alphabetical order.

Customers called the auto center, complaining that their vehicles wouldn’t start or that the horn had started blaring without stop in the middle of the night. The only way to stop the horns was to remove the car battery. When over one hundred calls came in over a short period of time, the car company realized that there must be something bigger going on. Many of their clients missed work or had other difficulties due to the system in their car being activated.

Hackers and Car Insurance: A Previously Unknown Combination

Cars these days have very sophisticated computer systems, as well as protection built into them. The idea behind the no-start system was a practical, albeit controversial one… companies could offer credit to people who had no credit history, with less chance of losing money. If someone doesn’t pay on time, their car can be made unusable remotely. While controversial, this allows companies to extend credit to potentially high risk drivers.

The system allows:

• Honking to remind owners to pay up
• Localization of a vehicle if hidden
• Disabling of the ignition switch to ensure the vehicle is not moved

Until recently, car insurance companies would never have had to consider the need for hacker insurance, but now that has become a very real issue. Auto insurance firms are starting to take a second look at this problem. While no one has hacked the no-start system before, now that it has been done, we can probably expect to see more attempts in the future. Companies will have to develop new safeguards and firewalls to ensure that these incidents don’t become more common.

What You Need to Know

What can you do to ensure that you don’t fall prey to a hacker attack? First, you need to know exactly what your vehicle has installed. The Webtech Plus system that Texas Auto Center was using is designed to prevent delays in repossessing cars. If someone doesn’t pay up, their vehicle is simply disabled, ensuring that they don’t have the chance to hide it or sell it. You should be informed when you purchase a vehicle if it contains a system like this.

Other things you can do to avoid problems include:

• Checking with your insurance company to see if hacking is covered
• Staying in touch with the car retailer in case problems occur, you can be notified
• Notifying the company as soon as your vehicle begins to act up

This type of anti-delinquent system has been in use for nearly a decade, with this being the first time anyone has hacked the cars in this manner.

If you are unlucky enough to be the target of a revenge attack like that of Ramos-Lopez, you can remove the car battery to stop the horn from going off and call the company that sold you the car. If your car insurance covers this type of incident, you would also need to report it to your insurance company.

Posted: March 18, 2010