According to a new report by Timetric, the market for cyber liability insurance is at an early stage of development with a large opportunity for expansion.
Companies collect, manage and store data electronically, social media interaction has increased and portable computing devices are growing in popularity. These growing trends increase exposure to cyber threats such as hacking, extortion, and data leaks. The loss of business due to downtime and loss of functionality is another serious cyber threat to businesses. According to a new report by Timetric, the market for cyber liability insurance remains largely untapped with a strong opportunity for growth.
Companies losing millions due to cyber threats such as data breaches
Sony experienced a hack in 2011 that leaked the personal information of 77 million PlayStation Network users. LinkedIn suffered a leak of over 6 million passwords, and data breaches at the Universities of Nebraska and North Carolina saw thousands of personal records exposed. Global Payments confirmed a data breach had exposed details of up to 1.5 million MasterCard and Visa payments. Each of these cyber security breaches resulted in multi-million dollar costs for investigation, fines and legal settlements. These costs flag the negative impact a data breach can have on company finances and reputation.
The cost of cyber liabilities
A 2011 UK government report estimated that cyber crime costs the UK as much as GBP27 billion a year. GBP21 billion of this is estimated as costs to businesses. Of this GBP9.2 billion comes from theft of intellectual property, GBP7.6 billion for industrial espionage, GBP2.2 billion for extortion, GBP1.3 billion for online theft and GBP1 billion for loss or theft of customer data.
Businesses both small and large feel the pain
The Information Security Breaches Survey for 2013 calculated that in the aftermath of its most serious data breach, damage to reputation represents the largest cost to a large firm, followed by response costs and business disruption. For smaller businesses the cost of business disruption is, on average, eight times higher than any other resulting cost.
Untapped potential of cyber liability insurance
As cyber liability insurance represents just 0.01% of the UK’s non-life insurance market, there is large scope for expansion. Cyber risk is not industry-specific; it spans financial services, healthcare, retail, charities, recruitment, e-commerce, legal services and any business using Information and Communications Technology (ICT).