How do you insure the intangible?

Cyber-liability: new and fast growing.

Cyber liability insurance is a newly-established insurance category in the UK, estimated by the industry to represent GBP3–4 million, or just 0.01 per cent of the country’s non-life gross written premiums. However, this belies the market potential, with an estimated 4.8 million private businesses registered in the UK and growing use of the internet among these firms.

Indeed, it is developments in the use of information technology for business that have highlighted the issue of liability in cyberspace. Firms collect, manage and store data electronically, social media interaction has increased and portable computing devices are growing in popularity. This technological evolution means UK firms are increasing their exposure to cyber threats such as hacking, extortion, data leaks and business downtime, all of which could result in an onerous financial burden to resolve.

A number of high-profile data leaks during 2011 and 2012 highlighted the costs involved when personal data is exposed. Beyond the obvious monetary costs of launching an investigation and settling compensation payouts comes the costs which are more difficult for underwriters and businesses to quantify: damage to reputation, business disruption and lost business all have to be taken into consideration. A joint industry and government report, the Information Security Breaches Survey for 2013, calculated that in the aftermath of its most serious data breach, the highest cost to a large firm (more than 250 employees) stemmed from damage to reputation, followed by response costs and business disruption (see chart, below). For smaller businesses the cost of business disruption is, on average, eight times higher than any other resulting cost.

Average cost of a large organisation's worst cyber incident (GBP, 2012)

Industry surveys suggest a low awareness of cyber liability products among UK businesses. In all likelihood, managers believe these intangible risks are covered by their existing commercial liability insurance policies, yet traditional policies do not tend to address issues related to the internet or electronic data.

If the growing risk in the impalpable world of cyber data does not provide the catalyst for uptake of cyber liability insurance, regulatory changes will likely prove the strongest incentive for British businesses. The European Commission (EC) aims to harmonize laws on the protection of personal data across the EU. In the event of personal data being exposed, firms will be mandated to notify national authorities - the Information Commissioner's Office in the UK - and will face fines for non-compliance. The new law is slated for introduction in 2014 and is expected to be the primary growth driver of cyber liability insurance over the next five years.

This piece first appeared on Timetric

Photograph: Getty Images

Rebecca Larkin is an economist at Timetric

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New Digital Editor: Serena Kutchinsky

The New Statesman appoints Serena Kutchinsky as Digital Editor.

Serena Kutchinsky is to join the New Statesman as digital editor in September. She will lead the expansion of the New Statesman across a variety of digital platforms.

Serena has over a decade of experience working in digital media and is currently the digital editor of Newsweek Europe. Since she joined the title, traffic to the website has increased by almost 250 per cent. Previously, Serena was the digital editor of Prospect magazine and also the assistant digital editor of the Sunday Times - part of the team which launched the Sunday Times website and tablet editions.

Jason Cowley, New Statesman editor, said: “Serena joins us at a great time for the New Statesman, and, building on the excellent work of recent years, she has just the skills and experience we need to help lead the next stage of our expansion as a print-digital hybrid.”

Serena Kutchinsky said: “I am delighted to be joining the New Statesman team and to have the opportunity to drive forward its digital strategy. The website is already established as the home of free-thinking journalism online in the UK and I look forward to leading our expansion and growing the global readership of this historic title.

In June, the New Statesman website recorded record traffic figures when more than four million unique users read more than 27 million pages. The circulation of the weekly magazine is growing steadily and now stands at 33,400, the highest it has been since the early 1980s.