Data breach severity is up significantly—so much so that Willis is telling clients to begin to look for higher cyber insurance limits and deductibles.
“We can start looking at cyber as more of a catastrophe exposure than we had previously,” Thomas Srail, senior vice president for Willis FINEX North America told Advisen.
Advisen Loss Insight data illustrates that the number of data breach cases affecting more than 100,000 records rose significantly between 2012 and 2013 and has risen nearly sevenfold since 2004.
In a January 16 blog, Srail observed that between 2012 and 2013 alone, the total number of records breached grew from 260 million to 822 million even though 2013 had about “a third less data breaches reported/cataloged than 2012.”
The increase in frequency and decrease in severity trend is likely to continue, said Srail, given that 8 of the top 15 largest breaches of all time occurred in 2013, as encryption systems and cyber criminals are becoming more sophisticated.
“Much like their victim companies, hacking organizations learn from each breach,” Srail explained in his blog. “Funding their illicit activities while keeping risk-versus-reward in mind is causing them to pick targets carefully, as maximum ‘payoff’ is key.”
Beyond that, Srail said, encryption is paying off in terms of limiting the count of data breach reports.
“Only 3-4 years ago 25 percent to 30 percent of all data breaches were due to lost laptops and other media devices,” he said.
Today, with data encryption preventing many of these sources of stolen data, “We are down to about 10 percent of the breaches being lost laptops, flash drives and such,” srail said. This is bringing frequency down substantially.
But at a time when breach severity can reach the dimensions of the Target theft—in which various personal data of at least 70 million customers were stolen—Srail sees insured’s seeking higher cyber coverage limits.
Willis is now recommending its insured’s consider both larger deductibles and larger limits for their cyber programs.
After all, he said, “This is still a buyer’s market.” Srail notes that “cyber insurance today is as cheap as it has ever been historically.”
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