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 in the United Kingdom.
Companies are losing millions due to cyber threats such as data breaches. For example, Sony experienced a hack in 2011 that leaked the personal information of 77 million PlayStation Network users. LinkedIn suffered a leak of over six 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 are increasing. A 2011 U.K. government report estimated that cyber crime costs the U.K. as much as GB£27 billion a year. GB£21 billion of this was estimated as costs to businesses. Of this, GB£9.2 billion came from theft of intellectual property, GB£7.6 billion for industrial espionage, GB£2.2 billion for extortion, GB£1.3 billion for online theft, and GB£1 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 represented the largest cost to a large firm, followed by response costs and business disruption. For smaller businesses the cost of business disruption was, on average, eight times higher than any other resulting cost.
There is much untapped potential in the market for cyber liability insurance, according to Timetric. As cyber liability insurance represents just 0.01 percent of the U.K.'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.