As the world continues to embrace technology and its many advantages, business also has begun to rely more and more on technology, storing large amounts of sensitive data electronically. The ease at which computers can store and access information is a major reason for the shift toward electronic storage. With the efficiencies computers bring to the market, a new area of risk has been inadvertently created. The storage of sensitive information on computers opens business up to cyber attacks, with hackers looking to acquire company or customer information such as passwords or credit card numbers. The hackers can then use or sell this information, harming businesses, consumers, and company reputations.
The issue of cyber attacks has been highlighted by many high profile security breaches, such as ones at eBay, Citi, Target, and Sony. The attacks have left companies scrambling to correct the problem, but more importantly, companies have to regain the trust of their customers that their sites and accounts are safe from any further attacks. The loss of confidence can cause large drops in sales for businesses hit by cyber attacks. Target, after being hit by a cyber attack that compromised 110 million customer accounts, reported a 46% drop in profit during the fourth quarter, and Sony lost at least $171 million because of a security breach with the PlayStation Network.
As businesses look at the costs associated with cyber attacks, insurance for these security breaches is becoming more popular. Last year, over $1.3 billion was spent on cyber-insurance premiums, and the number is expected to grow in 2014. The problem for businesses is that as of now, cyber-insurance will only cover up to $300 million at most for breaches, which can be much less than the financial damages surrounding the loss in reputation for major corporations. As businesses continue to adapt to the ever changing technological world, more investment will be needed in improvements in security and technological innovation to counter attacks prior to the breaches occurring. Until these advances occur, more companies will be forced to buy cyber-insurance, and these new costs will eventually be passed to the consumer.