Many companies are taking advantage of cyber insurance to ease the blow of security breaches by hackers, according to The Wall Street Journal. Ever since Target was hacked, sales of these insurance policies have picked up.
Schools are among the entities that have taken cyber insurance seriously, but every company with confidential data such as payroll information might consider getting insurance. The insurance often covers account monitoring services, making it less expensive to hire third-party security groups.
“You hear in the news of all those things happening, and we just wanted to make sure that our employees would be covered in case of a breach,” said Nancy Hoover, a school district finance official.
Target Slowly Recovers
Business is beginning to return to Target, which has reassured investors, Reuters reported in February. Shares had fallen by 11% since the breach made the news, but after optimistic reports of Target’s first quarter, stocks rose by 6.8%.
According to Reuters, the data breach led to hackers stealing 40 million credit and debit card records, along with 70 million other records containing customers’ personal information including addresses and phone numbers.
Initially, after the first news of the breach reached the public, there was a 46% drop in net profit during the holiday quarter. And the costs associated with the breach totaled $61 million.
The data breach “took the wind out of Target’s sails – and unfortunately sales,” said Sandy Skrovan, U.S. Research Director at Planet Retail.
Many Companies Are Beginning to Invest in Policies
Aon PLC, an insurance company, estimates that premiums for insurance that covers cyber-related risks in 2013 totaled $1 billion, which is a major increase from $675 million the year before.
Recently, the state of New York judged that in order for a policy to cover cyberattacks, it must explicitly be cyber insurance instead of ordinary liability insurance. Sony had argued that its regular insurance should cover some of the fallout from a 2011 hack of its online game store. This further encouraged companies to purchase cyber insurance, as it is their only method of protecting against the financial burden of a successful hacking attempt.
Companies that sell products online, including small companies, “have many of the same exposures as a company like Target, just on a smaller scale,” said Robert Hartwig, president of trade group Insurance Information Institute.
The insurance can be expensive. One policy is $35,000 a year for $1 million of coverage. However, sales of this insurance policy will likely rise as many companies are waking up to the threat of cyberattacks.
More on Identity Theft:
- Identity Theft: What You Need to Know
- How Can You Tell If Your Identity Has Been Stolen?
- How Credit Impacts Your Day-to-Day Life