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The Rise Of Cyber Insurance

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The Rise Of Cyber Insurance

Last year's high profile hacking attacks on Target Corporation (NYSE: TGT), Home Depot Inc (NYSE: HD) and Sony Corp (ADR) (NYSE: SNE) raised awareness among consumers and businesses alike that cybercrime was developing faster than the programs that protect against it.

The security breaches from 2014 proved costly to the affected companies' reputations, as consumer trust was severely affected, but also ended with expensive damage control that took its toll on the companies' bottom line.

New Insurance Options

Now, insurance companies are stepping up to provide cyber insurance that will cover a firm that has fallen victim to a hacking attack to mitigate its financial loss. Companies like Travelers, American International Group Inc (NYSE: AIG) and Chubb Corp (NYSE: CB) all offer different types of cyber insurance to firms of varying sizes.

Related Link: Protect Yourself From Cyber Attacks

While large-scale attacks like the one suffered by Sony draw attention to the problem, the reality is that smaller firms are at just as much, if not more, risk than their larger peers.

Underinsured

However, despite the rise in cybercrime and the growing number of cyber insurance providers, many big companies are under-insuring their data-based assets. A study from the Ponemon Institute found that a company's IT assets are 39 percent more exposed than their tangible property assets.

The report said that because the Internet of Things (IOT) has opened up a new way for hackers to easily penetrate security protocols, the risk of cybercrime has increased exponentially, but that companies haven't upped their insurance for such an occurrence proportionally.

Related Link: The Internet Of Things Complicates Cybersecurity Efforts

Still A Growing Field

Many believe this lack of investment in cyber insurance is due to the relatively new nature of the market.

While policies regarding fires and damages have been around for years and have been perfected to offer several varying types of coverage, insurance policies for data are less comprehensive, leaving many businesses to decide to take the risk and go without a policy.

 
Image Credit: Public Domain

 

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