According to recent post from Property Casualty 360°, The Six Trends of Cyber Risk in 2014, insurers need to know:
- Data breach costs are trending downward. The cost per record to respond to a breach dropped from $194 to $188 and is expected to continue to decline.
- With the rise of cloud computing and the storing of data oversees, data breaches are likely to be global in nature. This could lead to complexities in managing or responding to breaches since the data flows are global but the laws and norms applying to the breaches might be local.
- The concentration of data breaches in the healthcare industry is already high. With the significant changes taking place in the healthcare industry and use of exchanges, the number of breaches in this industry could increase in 2014.
- More companies will be buying cyber security insurance. One third of the companies have purchased some form of insurance against cyber risks, and one study estimates a 50% growth in policies purchased next year.
- Tired of hearing about breaches, consumers might not respond to warnings or take adequate steps to protect themselves after an incident. This “breach fatigue” could result in higher levels of fraud.
- In the absence of significant action on the federal level, state officials are expected to take a more active role in responding to data breaches and in establishing best practices for protecting data.
A few other things to consider:
- The increased awareness of cyber risks should cause more companies to consider buying cyber insurance.
- While there is a sizable and growing market for third-party policies covering losses suffered by an insured’s customers or clients, the market for first-party cyber insurance is less robust.
- With the rise of cyber attacks, insureds also need insurance covering direct losses to the companies, such as reputational injury or costs incurred to recover lost data or to repair infrastructure.
- The industry needs to educate the market about the importance of first-party cyber insurance and then develop cost-effective products to address this need.