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Is insurance the wrong solution to cybersecurity?

Companies are focusing on the consequences of cyber crime, not the causes, by purchasing liability and errors-and-omissions insurance.

By Mark Gilbert | Updated on April 13, 2015
Companies are focusing on the consequences of cyber crime, not the causes, by purchasing liability and errors-and-omissions insurance. (Photo: Shutterstock)

(Bloomberg View) — Companies are finding a way to minimize the repercussions when their digital security is violated. Unfortunately, they’re turning to the same safeguards that protect the guitar-strumming hands of Keith Richards, the goal-scoring limbs of David Beckham and the most remarkable assets of Dolly Parton, rather than coming clean about the perils of data breaches or pooling information so that threats can be properly quantified and addressed. In short, they’re focusing on the consequences of cybercrime, not the causes, by purchasing liability and errors-and-omissions insurance.

It seems buying insurance against the financial consequences of cyberterrorism from Lloyds of London, the world’s oldest insurance market, is easier and more palatable than tackling the underlying problem. High-profile attacks, including the data on 100 million customers stolen from U.S. retailer Target in 2013, and the emails filched from Sony’s film studios at the end of last year, have made companies fearful of the economic consequences of cyber robbery. Yet they haven’t done much to puncture the secrecy that surrounds the issue.

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