Cyber insurance has been around for almost a decade, but only now is a popular safeguard against hackers.
Almost every industry, from agriculture to healthcare, is using online data for its services. The so-called “Internet of Things” (IoT) — the network connectivity of everyday objects — will lead to new capabilities that could yield a $3 trillion a year economic increase by 2025, according to a McKinsey Report. Businesses have to keep up with the rest of the market and adapt to the online world.
“Cyber Insurance has been around for many years; however, it has been mostly focused on hardware or physical damage as a result of a cybercrime so most companies do not have coverage for data loss even today,” Joseph Carson, director of Global Strategic Alliances at Thycotic, a D.C.-based cybersecurity firm, told The Daily Caller News Foundation in an email.
“With more and more companies becoming dependent on IT and data” there has been “a significant change with data becoming more tangible and having significant monetary value where we have seen the likes of Facebook, Airbnb and Uber becoming multibillion dollar companies almost purely based on information and data,” he continued.
The University of Calgary recently joined the growing trend. The school paid $15,000 to retrieve stolen personal information in the form of a ransomware attack, but the university’s vice president, Linda Dalgetty, attributed the quick recovery of critical online systems to its pre-established cyber insurance policy.
Governments are equally susceptible to data breaches. The Montana Department of Public Health & Human Services was hacked in 2014, which put the personal information of roughly 1.3 million people in danger. The situation was rectified after department officials correctly followed a process of predetermined steps.
“The state’s cyber insurance program was instrumental in providing an immediate and appropriate response to the incident in accordance with state and federal law(s) with minimal disruption of services to citizens,” Brett Dahl, administrator of the Risk Management and Tort Defense Division of Montana, explained in an email to GCN.com. “The state’s cyber insurance program provided vital vendor services including incident reporting, forensics investigation, mail notification, credit monitoring, call center assistance and legal expertise.”
Federal government institutions like the Office of Personnel Management and the Internal Revenue Service recently had highly hazardous data breaches, further exemplifying the need for cyber insurance.
The same goes for the private sector. Sony’s Playstation network was compromised in 2011 after more than 77 million personal accounts were breached. The software vulnerability cost Sony an estimated $170 million. The tech conglomerate thought its insurance policy covered cyber breaches, according to TechCrunch. After a legal dispute with its insurers, courts ruled against Sony and confirmed its policy did not entail cybersecurity.
The need for cyber insurance is more urgent as every sector of society becomes more interconnected through internet. “Almost all data has a monetary value,” Carson stated. “Absolutely any company that is helping organizations protect and provide cybersecurity to their business and will help reduce the risk of cybercrime” will reap the rewards.
Cyber insurance is expected to be such a substantial market that the National Association of Insurance Carriers established a Cybersecurity Task Force in 2014. The group created the “Principles for Effective Cybersecurity Insurance Regulatory Guidance” and the “NAIC Roadmap for Cybersecurity Consumer Protections” to assist insurers in safeguarding clients’ online infrastructure.
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