If your company were hit with a cyber attack today, would it be able to foot the bill? The entire bill, including costs from regulatory fines, potential lawsuits, damage to your organization's brand, and hardware and software repair, recovery and protection?
It's a question worth careful consideration, given that the price of cyber attacks is rising at an alarming rate.
The second annual Cost of Cyber Crime study, released last August by the Ponemon Institute, reported that the median annualized cost of detection of and recovery from cyber crime per company is $5.9 million -- a 56% increase from the 2010 median figures. The costs of cyber crime range from $1.5 million to $36.5 million per company.
A growing number of insurance companies are offering cyber protection in the event of breaches and other malicious data attacks. But so far, they're having some difficulty making their case. Surveys show companies have yet to embrace these policies, whose costs can be staggering.
The annual PricewaterhouseCoopers Global State of Information Security Survey for the first time in 2011 asked respondents about whether their organizations had an insurance policy to protect against cyber crimes. Some 46% of the 12,840 worldwide respondents -- which included CEOs, CFOs, CIOs and CSOs as well as vice presidents and directors in IT and information security -- answered yes to the question: "Does your organization have an insurance policy that protects it from theft or misuse of electronic data, consumer records, etc.?"
Additionally, 17% said that their firms have submitted claims, and 13% said they've collected on those claims. (PwC didn't ask why the remaining 4% hadn't collected, but says it's likely they were denied.)
Because it's the first time PwC had asked its respondents about cyber insurance, there's no way of knowing if those numbers represent an increase; however, a separate, albeit much smaller, survey indicates that companies may be slow to warm up to cyber insurance.
The 2011 Risk and Finance Manager survey, conducted by global professional services company Towers Watson, found that 73% of the 164 risk managers surveyed work at companies that have not purchased network liability policies. Some 37% of those who didn't have polices said they believed their internal IT departments and controls were adequate, while another 15% either said the cost of a policy was too high or that they weren't overly concerned about the risk.
Confusion in the marketplace
Lawyers and information security leaders say they encounter many executives who harbor misconceptions about cyber insurance. Decision-makers, they say, often mistakenly believe that standard corporate insurance policies and/or general liability policies cover losses related to hacking or that their cyber policies, if they have them, will cover all costs related to a breach. Most of the time, they won't.