Many companies are responding to IT privacy and cyber risks as stories about lawsuits, data breaches and hacking attacks have become more prominent in the daily news. They’re taking steps to not only protect their IT assets but their financial ones as well, by purchasing Cyber Insurance.
Marsh USA released a report on March 14, 2013, entitled Benchmarking Trends: More Companies Purchasing Cyber Insurance. It revealed that the number of U.S. companies purchasing Cyber Insurance has drastically risen over the past few years—increasing 33% between 2011 and 2012. And those who had previously purchased Cyber Insurance are now buying more of it. Cyber Insurance limits purchased in 2012 were 20% higher than in 2011, averaging $16.8 million.
These ever-expanding and increasing trends are due to a greater awareness regarding the possible risks and costs of cyber exposure. Interest and a focus on cyber exposure across a multitude of industries has been driven by high-profile attacks over the past few years on national and international companies, the U.S. Military, and federal and state governments. Businesses now consider Cyber Insurance a necessity to cover IT losses and possible litigation costs.
Cyber Attacks include:
- Computer fraud;
- Theft or manipulation of sensitive or private information, such as health or financial records; and
- Computer viruses that damage computer and network hardware, destroy data, cripple IT systems, and disrupt business operations.
Bob Parisi, the Senior VP of Technology, Network Risk and Telecommunications for Marsh USA, reported in a Financial Times article in March 2013 that Cyber Insurance is becoming one of the fastest expanding lines of insurance today:
In 1998, it was zero. More companies are becoming painfully aware of how dependent they are on technology. The awareness has always been at the IT level, but it’s now become embedded in the minds of risk managers, general counsels and at the board level.
Insurers have begun to support this new interest by revisiting their normal policies regarding general liability, property and fidelity/crime insurance in order to clarify the extent to which they’ll cover privacy and cyber risks. The line of coverage and range of issues revolving around Cyber Insurance continues to rapidly evolve as more insurance buyers are beginning to view Cyber Insurance as an essential purchase; and as more insurers are showing an interest in security practices for the companies they’re currently insuring.
When you consider the increase in data breaches, new computer viruses and cyber attacks you can see why Cyber Insurance is a real consideration for businesses now and into future.