With terabytes of data flowing through all over the internet per second, it has become as much a daunting task to keep track of everything on it. Because of this companies are at a serious risk of security against personal information of their clients and are more prone to cyber-attack. The list of high profile companies that have been breached by cyber-criminals ranges from JPMorgan, Staples to Sony and Target. In most cases the attackers have made away with customer’s data, which have directly impacted on the company’s reputation.
Not only the company incurs huge financial losses, but it also diminishes their client’s trust into the company with safeguarding with their information. The company’s exposure to direct financial loss from things like credit-card theft makes customers doubt their decision to invest in the company.
To tackle this growing problem, leading insurers including American International Group (AIG), Liberty Mutual, Travelers, and W. R. Berkley have placed policies and services. Like all insurance activity, it’s all about asserting risk. These companies provide higher risk management. The policies range from $ 1 million to $ 10 million, depending on the risk assessment.
The need of Insurance
Smaller companies do not possess the resources to expertly track and tackle these risks. And even when the breach is identified, the companies couldn’t hold off the hackers from taking away valuable information. This is where these investing companies come in, to hold off the bleeding, bringing in forensic computer analysts. The insurers have pre-arranged contracts for these services and are much more capable to handle a breach, quickly and economically than most firms can manage.
Even if a company can avoid the negative assault from the media, they are left with heavy burdens. They have to alert every customer affected and probably have to provide credit monitoring or other services. The companies then have to defend against costly lawsuits, depleting resources, and bring extensions to a growing list of regulations.
Most companies that are susceptible to these kinds of attacks could not comprehend where and how the breach is occurring. In fact, it takes some time for the company to realize that they have been a victim. Also by the time they start to put infrastructures in place to stop the breach, the criminals already gets away with most of the data.
Type of Policies Covered
Mostly the risks fall under First party risks and Third party risks, accordingly the policies vary for the company or an individual.
The first party insurance covers the company’s own business, including the loss or damage to data and loss of software programs, legal resources, reputational damage and theft of money or digital data.
The Third party insurance covers the company’s customers or the clients invested in the company which includes privacy breaches, investigations, civil damages associated with it, negligence of privacy via print media and customer compensations.
Many breaches occur due to small negligence by the employees like losing a laptop which can lead to disastrous loss. Companies like Traveler also provide insurance for individuals, protecting them against desecrations like identity fraud. A victimized individual can avail access to resources for credit monitoring, identity restoration, expense relief for replacement of a driver’s license and other credentials, and compensation for time off work to take care of all these things.
Though cyber insurance was originally perceived for larger ventures, there is a steady rise in policies to cover costs with only few employees. Today the industry premiums roughly amount to $ 2 billion, a two fold increase in just 18 months. Experts believe it will hit a figure of $ 5-6 billion in the next 5 years.
Being still in its early days, companies don’t yet know whether their risk assessment calculations are accurate enough as there is not much data available. They are still trying to piece together for profits. Even though it’s a potentially promising area, Insurers are taking precautions to proceed in this unchartered sea.