Cybersecurity insurance has long been touted as a way that companies could offset the risk of online attacks and data loss, but insurers continue to lack the data necessary to create a competitive and sustainable market.
The increasing availability of threat intelligence, however, could allow insurers to better gauge the risk that potential customers may face online. An analysis of external data that indicates whether a business may be compromised, for example, has detected significant differences between the security posture of companies in different industries, according to a recent report by security-ratings firm BitSight. The financial, retail, and power industries all have fewer compromises and security alerts than the software and technology industry, the firm found.
Such data could help insurers improve their risk picture, says Stephen Boyer, co-founder and chief technology officer for BitSight.
"If they can get good proxies for how an organization is managing risk over time, then they can do a better job at modeling that risk," Boyer says. "Right now, they don't have any of that -- they basically only have questionnaires."
Cyberinsurance has grown more popular in recent years. A recent Ponemon Institute survey found that 31 percent of companies had a cybersecurity insurance policy in place, while another 39 percent of companies plan to buy a cybersecurity policy.
The lack of security data, however, is hampering the adoption of cyberinsurance, according to the study. Companies that do not plan to adopt policies list a variety of reasons all linked to the uncertainty in measuring risks, citing expensive premiums, too many exclusions, and not appreciably different coverage than their property and casualty insurance, the Ponemon survey found.
[Liberty Mutual says it isn't liable to pay cyberinsurance claims filed by grocery chain Schnucks. See cyberInsurer Sues Grocery Client, Says It Won't Pay Breach Claims.]
Insurers need to find ways of gathering concrete data on the risk, says Andrew Braunberg, research director of for security consultancy NSSLabs.
"The degree to which the insurance companies currently look at the technical controls you have in place to determine the premium for these policies, they are not very sophisticated on how they figure that out. They don't have good data," he says.
NSSLabs focuses on helping companies measure their internal controls to gather a better risk picture, while BitSight and other threat-intelligence firms focus on externally available information that could indicate whether a company has been breached.
Yet companies themselves often do not have their own data or are unwilling to give guidance on their cyber-risk. Only 1 percent of Fortune 1000 companies disclosed an actual breach of cybersecurity in their financial filings to the Securities and Exchange Commission (SEC), according to a survey by Willis, a global insurance broker. Seventeen percent of the Fortune 1000 did not disclose any information about their cyber-risk, the company found.
Many companies continue to lack the capabilities necessary to discover attacks within their networks, Ash Raghavan, principal for insurance in the security and privacy practice at accounting firm Deloitte, said in an e-mail interview.
"They often lack the maturity or means to gather information that resides within their own realms, and the completeness and accuracy of the available data is unclear," he says.
Some relief may be found in the Cybersecurity Framework, a set of voluntary best practices created by the National Institute of Standards and Technology (NIST) to help companies in securing their systems. While the framework will be finalized next year, many proponents have called for incentives to convince companies to adopt the guidelines. Lower insurance polices could be one such benefit, says NSSLabs' Braunberg.
"If the insurance companies bought into the framework, it might help them to incentivize companies to adopt the framework by requiring policy holders to implement the best practices," he says.
Yet today's threat intelligence providers need to develop a more mature and consistent set of risk metrics before they will truly be of use to insurers, says Deloitte's Raghavan. In addition, general threat intelligence is far less useful than information that may apply to companies in a certain geography or sector, he says.
Finally, threat intelligence will never be sufficient for insurance companies to gauge risk because intelligence sources generally detect attacks after they have already happened, he says.
"The threat landscape evolves quickly," Raghavan says. "This volatility suggests that today's threat intelligence may not provide a sufficient basis for insurers to understand how to price their products over the long term, even if the scope of insurance is quite narrow."
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