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18.01.2016
1708
The surge in hacker attacks on U.S. companies over the past two years has forced insurers to raise premiums, leaving companies at risk scrambling for cover.
In addition to the price hike, insurers have raised deductibles and in some cases capped payouts at $100 million, leaving many without hope of protecting their assets in the event of a hacker attack that could cost twice that amount. "Some companies simply can't afford the insurance they need," says Tom Regan, of Marsh & McLennan Co. The cost of insurance, which helps cover litigation costs, credit monitoring, legal fees and loss settlements, varies widely and depends on the level of protection a company has. But overall, it is growing rapidly.
Retailers and life insurers have been particularly hard hit by recent attacks on companies such as Home Depot Inc, Target Corp, Anthem Inc and Premera Blue Cross. Health insurers hit by hacks have seen their premiums triple, Beazley Plc's said. On average, retail premiums rose 32% in the first half of this year, after a relatively quiet 2014, according to Marsh.
Retailers and insurers must now get used to higher deductibles. Even the biggest players in the cyber insurance market will NOT write a policy worth more than $100 million to high-risk customers. In 2013, the major American retailer Target was hacked and reported losses of $264 million. Given the maximum amount of the policy, such companies will have to cover the losses out of their own pockets.
The second largest life insurer in the United States, Anthem, has struggled to renew its insurance policies after a hack earlier this year that exposed the data of 79 million people. The company was able to negotiate a $100 million settlement, but only after agreeing to pay $25 million in the event of any future attacks. Anthem wouldn't tell Reuters how much the deductible increased, but it was likely much lower.
What does this mean for insurers?
The rise in cyberattacks has both positive and negative aspects for insurers. Sure, they have to pay more for insurance, but more companies are buying policies. If there's demand, prices will rise. Given that, the cyber insurance market is set to triple to $7.5 billion in the next five years, according to consulting firm PwC.
But insurers realize they're taking on risks that are hard to predict. "We're turning some customers away," says Tracy Grella of American International Group Inc., a large insurance company. AIG offers policies that cover up to $75 million per cyberattack, but only to the world's largest banks, which are most concerned about security and reducing the risk of hacking. Another insurer, Ace Group, has started offering $100 million in insurance, but only after it has tested the protection of potential customers. Warren Buffett's Berkshire Hathaway has also said it will be very selective in choosing customers.
Retailers will have a hard time
Retailers looking for cyberattack insurance are being told to listen to the same advice that homeowners are given - to put new locks on their doors and windows. Insurers are promoting new technologies that can protect card payments - tokens and encryption. "Retailers who don't use them are unlikely to be able to get insurance," says Ben Beeson of Lockton Companies. In addition, insurance restrictions can lead to an increase in the number of lawsuits. "The restrictions and rules that we see in the underwriting process (determination of value) now will become the subject of lawsuits in 2-3 years," says Linda Bennett, partner at Lowenstein Sandler.
Ukrainian companies should also think about insurance. Let's remind you that our country is in the risk group.
Based on materials: igate.com.ua
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