There are all types of insurance — home, health, auto, to name a few. But the fastest-growing insurance in America?
Cyberinsurance, according to The Wall Street Journal.
The concern and desire to protect personal information is certainly driven by the recent hacking incidents. From Yahoo’s second hack linked to more than 1 billion user accounts, to the KFC loyalty program hack affecting more than 1.2 million, to the Madison Square Garden data breach, to extra-sensitive Ashley Madison information accessed by hackers — never mind stories of hackers accessing information in countries outside the U.S.
Analysts at PricewaterhouseCoopers said that the corporate cyberinsurance market that is currently worth more than $3 billion will grow to more than $7.5 billion in premiums by 2020. Those premium totals will be driven by rising prices.
Experts say that, in comparison to other types of insurance, this is not only significantly higher but is in reference to a lack of major catastrophes of these aforementioned magnitudes, affecting more people in one single incident. They add that no other type of insurance has grown as quickly, with some carriers reporting that they’re doubling their book year over year. Other types of insurance are slated to decline in the coming years.
The insurance, which is solely applicable to data breaches, includes notifying customers and complying with regulations.
And as supply and demand curves go, more demand means insurance providers can bump up prices. Analysts have seen prices jump between 5 percent and 10 percent for the coming year. However, depending on the company and its own number of customers a breach could affect — such as big retailers or health care agencies — the price can surge even higher.
However, despite that demand, because cyberinsurance is so new, there is expert concern around unknown risks and unexpected costs that may fall within the insurance coverage. It’s well-known that hackers are creative, with many wanting to get paid through clandestine measures, such as with bitcoin, which allows for maintaining anonymity.
As a result, the competition to hire experienced cyberinsurance underwriters is aggressive. Some of these insurance companies have policies that limit payout to $10 million–$25 million on these cyberinsurance plans, with larger companies having the ability to purchase plans as high as $500 million. The average payout from an insurance company, however, is $665,000, according to NetDiligence. That said, the disruption that a hack causes could be valued at multiple times that.