Technology


No industry sector is immune from cyber threats, and a round-up of recent headlines and reports underscores the increasing risk and cost businesses face.

Just this week, U.S. Treasury Secretary Jacob Lew urged financial institutions and firms to redouble their efforts against cyber threats and said information-sharing and collaboration among businesses and with government is key.

Speaking at a conference in New York, Secretary Lew noted that the consequences of cyber incidents are serious and our cyber defenses are not yet where they need to be:

Far too many hedge funds, asset managers, insurance providers, exchanges, financial market utilities, and banks should and could be doing more. In particular, it is imperative that firms collaborate with government agencies and with other firms. Disclosing security breaches is often perceived as something that could harm a firm’s reputation. This has made many businesses reluctant to reveal information about cyber incidents. But this reluctance has to be put aside.”

Secretary Lew noted that some banks are already spending as much as $250 million a year to strengthen their cyber security. (Note: this is a cost borne by businesses).

Meanwhile, a new report from the New York attorney general’s office revealed that the number of reported data security breaches in the state more than tripled between 2006 and 2013, with some 22.8 million personal records of New Yorkers exposed in nearly 5,000 data breaches.

The cost to the public and private sectors in New York? In 2013 alone, upward of $1.37 billion, according to the report’s findings.

The Insurance Information Institute’s (I.I.I.) newly updated report Cyber Risks: The Growing Threat (of which I am a co-author) sheds light on the specialist cyber insurance policies developed by insurers to help businesses and individuals protect themselves from the cyber threat.

Market intelligence suggests that the types of specialized cyber coverage being offered by insurers are expanding rapidly in response to this fast-growing market need.

I.I.I. facts and stats on identity theft and cyber security are available here.

U.S. businesses are losing more financially from cybercrime, compared to their global peers, but are generally less aware of the cost, according to PWC’s 2014 Global Economic Crime Survey.

As cybercrime continues to increase in volume, frequency and sophistication, PWC’s findings suggest that U.S. organizations are more at risk of suffering financial losses in excess of $1 million due to cybercrime.

According to the study, some 7 percent of U.S. companies lost $1 million or more, compared to just 3 percent of global organizations.

In addition, 19 percent of U.S. organizations lost $50,000 to $1 million, compared to 8 percent of global respondents.

PWC doesn’t elaborate on the reasons for this discrepancy, but other studies have noted that the types and frequencies of attacks vary from country to country.

U.S. companies are also more likely to experience the most expensive types of cyber attacks, such as malicious insiders, malicious code, and web-based incidents, the research suggests.

Despite having more to lose, some 42 percent of U.S. companies were unaware of cybercrime’s cost to their organizations, compared to 33 percent of global respondents, according to PWC.

Yet, overall U.S. companies appear to have a greater understanding of the risk of cybercrime than their global peers.

PWC notes that U.S. organizations’ perception of the risks of cybercrime exceeded the global average by 23 percent.

Also, 71 percent of U.S. respondents indicated their perception of the risks of cybercrime increased over the past 24 months, rising 10 percent since 2011.

Hat tip to CNBC.com which reports on this story here.

Some 5,128 executives from 99 countries responded to the survey, of which 50 percent were senior executives of their respective companies. Some 35 percent represented listed companies and 54 percent represented organizations with more than 1,000 employees.

Cyber security and data breaches remain front and center on the Congressional radar as the Senate Commerce Committee today holds a hearing on protecting consumers from data breaches.

The witness list includes John Mulligan, vice president and chief financial officer at Target, and Dr. Wallace Loh, president, University of Maryland. There’s an insurance industry witness too, with Peter Beshar, executive vice president and general counsel, Marsh & McLennan giving testimony.

Recent data breaches at Target and the University of Maryland highlight the fact that organizations across many different business sectors are vulnerable to cyber attacks.

The February 18, 2014 UMD data breach compromised an estimated 309,079 student, faculty and staff records, including names, birth dates, university ID numbers and social security numbers.

The massive 2013 data breach at Target during the holiday season exposed the financial and personal information of as many as 110 million consumers.

A report released yesterday by the U.S. Senate Commerce, Science and Transportation Committee suggests that Target missed a number of opportunities to prevent the massive data breach. Hat tip to Reuters via Huffington Post which reports on the findings here.

The Senate staffers report, titled “A Kill Chain Analysis of the 2013 Target Data Breach” says key points at which Target apparently failed to detect and stop the attack include:

● Target gave network access to a third-party vendor, a small Pennsylvania HVAC company, which did not appear to follow broadly accepted information security practices. The vendor’s weak security allowed the attackers to gain a foothold in Target’s network.

● Target appears to have failed to respond to multiple automated warnings from the company’s anti-intrusion software that the attackers were installing malware on Target’s systems.

● Attackers who infiltrated Target’s network with a vendor credential appear to have successfully moved from less sensitive areas of Target’s network to areas storing consumer data, suggesting Target failed to properly isolate its most sensitive network assets.

● Target appears to have failed to respond to multiple warnings from the company’s anti-intrusion software regarding the escape routes the attackers planned to use to exfiltrate data from Target’s network.

The report analyzes what has been reported to date about the Target data breach, using the “intrusion kill chain” framework, an analytical tool introduced by Lockheed Martin security researchers in 2011, and widely used by information security professionals today.

This analysis suggests that Target missed a number of opportunities along the kill chain to stop the attackers and prevent the massive data breach.”

Check out an I.I.I. whitepaper on cyber risks and insurance here.

Two months after Target announced a massive data breach in which hackers stole 40 million debit and credit card accounts from stores nationwide and the rising costs related to the incident are becoming clear.

Costs associated with the Target data breach have reached more than $200 million for financial institutions, according to data collected by the Consumer Bankers Association (CBA) and the Credit Union National Association (CUNA).

Breaking out the numbers, CBA estimates the cost of card replacements for its members have reached $172 million, up from an initial finding of $153 million. CUNA has said the cost to credit unions has increased to $30.6 million, up from an original estimate of $25 million.

So far, cards replaced by CBA members and credit unions account for more than half (54.5 percent) of all affected cards.

In a press release, CBA notes that the combined $200 million cost does not factor in costs to financial institutions other than credit unions or CBA members, nor does it take into account any fraudulent activity which may have occurred or may occur in the future:

Fraudulent activity would push the cost of the Target data breach to the industry much higher, as consumers would not be held liable.”

A post over at the Wall Street Journal Corporate Intelligence blog points out that cyber attacks like these continue to be a drain on the wider economy.

It cites a study backed by computer security firm McAfee that last year estimated the total cost of cybercrime and cyber espionage to the United States at up to $100 billion each year.

Meanwhile, legal experts caution that companies need to take stock in the wake of the Target breach and make sure they have adequate insurance in place.

A post by Emily R. Caron in Media, Privacy and Beyond published by law firm Lathrop & Gage notes that fortunately Target appears to have a lot of insurance in place.

It cites reports suggesting that between cyber coverage and directors and officers (D&O) coverage, Target has $165 million in total limits, after self-insuring the first $10 million. (Hat tip to @LexBlogNetwork for highlighting this article)

However, The New York Times recently reported that total damages to banks and retailers could exceed $18 billion according to estimates by Javelin Strategy & Research.

In addition the NYT noted that nearly 70 lawsuits have already been filed against Target, many of them seeking class-action status.

As Caron notes in her article at Media, Privacy & Beyond, there is a big gap between $165 million and $18 billion.

Check out I.I.I. facts + statistics on ID theft and cyber security.

Recent breaches of customer data at retailer Target and banking giant Barclays are making headlines and underscore the growing risk to businesses from data breaches.

Of course, there’s a personal impact too.

The just-released 2014 Identity Fraud Report by Javelin Strategy & Research reveals that data breaches are now the greatest risk factor for identity fraud.

In 2013, one in three consumers who received notification of a data breach became a victim of fraud, up from one in four in 2012, the report found.

Some 46 percent of consumers with breached debit cards in 2013 became fraud victims in the same year, compared to only 16 percent of consumers with a social security number breached.

Other key takeaways from the report are that the overall incidence of fraud has increased even though the amount stolen has decreased.

The number of identity fraud victims increased by more than 500,000 to 13.1 million people in 2013, the second highest number since the study began. However, the dollar amount stolen fell to $18 billion, down from $21 billion in 2012.

This reflects more aggressive actions from financial institutions, identity theft protection providers and consumers, Javelin Strategy said.

There has also been a dramatic increase in account turnover fraud in the past year. According to the findings, account takeover fraud accounted for 28 percent of all identity fraud in 2013, a new record for the second year in a row.

Fraudsters also increasingly turned to eBay, PayPal and Amazon with the stolen information to make purchases.

Check out I.I.I. information on identity theft and cyber security here.

The fallout continues in the wake of the massive data breach at Target in which hackers stole 40 million debit and credit card accounts from stores nationwide between November 27 and December 15.

USA Today reports that so far three class-action lawsuits have been filed in the wake of the incident, seeking more than $5 million in damages. Two of the cases were filed in California and one in Oregon.

The same USA Today article reports that the Attorney General in at least four states – Connecticut, Massachusetts, New York and South Dakota – have asked Target for information about the breach, in what is regarded as the first step to a possible multi-state investigation into the breach.

Meanwhile, the Krebs on Security blog which broke the story of the Target breach last Wednesday December 18, reports that card accounts stolen in the breach are flooding the underground markets. Check out the latest reports here and here.

For anyone who shopped at Target during the breach period, the New York Times has a helpful Q&A on what you should do.

While latest studies indicate U.S. companies continue to improve their preparation for and response to a data breach, the security breach at Target highlights the vulnerability of major companies to this threat.

Both the organizational cost of a data breach and the cost per lost or stolen record declined last year, according to the 2013 Cost of a Data Breach study by the Ponemon Institute and Symantec.

The organizational cost of a breach declined from $5.5 million to $5.4 million and the cost per record from $194 to $188.

The Ponemon report also noted that while the cost of a data breach can vary widely because of the types of threats and data protection laws, the financial consequences are serious worldwide.

Check out I.I.I. facts and statistics on identity theft and cyber security.

More and more companies are using social media and many recognize the potential risks, but few have an adequate plan in place to manage those risks.

Two separate surveys point to the fact that as social media becomes even more widely used in the corporate setting, businesses need to properly assess and monitor the risks involved.

Chubb’s just-published 2013 Private Company Survey found that 68 percent of companies are using social media – up from 39 percent in 2010 – but only 12 percent are concerned that they will be sued for allegedly making defamatory posts.

Further, only 49 percent have a written social media usage policy for their employees, Chubb found.

Executives at 450 U.S. for-profit private companies were interviewed for the Chubb survey.

An earlier report from Grant Thornton LLP and the Financial Executives Research Foundation (FERF), found that some 71 percent of public and private company executives are concerned about the potential risks involved in the use of social media, but they believe the risks can be mitigated or avoided.

More than half (59 percent) of executives surveyed said their companies do not perform a social media risk assessment.

Also, two-thirds (66 percent) of respondents see their company’s use of social media increasing during the next 12 months, but only a third of respondents (36 percent) reported that their company has social media training.

As the report says:

The evaluation and monitoring of risk needs to be a key component of any organization’s social media strategy, and its importance cannot be overstated.”

More than 100 senior-level executives from public and private companies participated in the 2013 Social Media Risks and Rewards survey, which was conducted during May and June of this year.

Check out the I.I.I. paper Social Media, Liability and Insurance.

More insurance buyers are using mobile devices to begin their search for insurance coverage, though most complete their purchase offline, according to a study from Telmetrics conducted by Nielsen.

It reports that around half of insurance buyers begin the insurance research process on a mobile device, but 60 percent still use PCs in their purchase decision.

Ultimately, one out of four mobile insurance searches result in a conversion, and most (43 percent) make that conversion via a phone call to a local agent or to a company’s toll-free number.

The majority (80 percent) of insurance buyers using mobile devices search for auto insurance, followed by 38 percent for home insurance and 22 percent for health insurance.

A press release quotes Bill Dinan, president of Telmetrics:

Generating a 60-40 offline-online conversion split, insurance is a true multi-media engagement category that requires insurance marketers to meet a range of consumers’ search and conversion needs.

To aid mobile-driven conversions via calls, mobile insurance campaigns should prominently feature phone numbers and local agent office information for consumers to easily connect and make a purchase.”

The study also reveals that insurance buyers take a long time to consider their purchase and mobile is involved at every stage.

Nearly half of mobile insurance users take a month or longer to make a purchase and less than a quarter of insurance purchases happen within the day.

Hat tip to Insurance & Technology which reports on the findings here.

The percentage of companies buying cyber liability insurance is increasing substantially, according to an annual survey jointly produced by Advisen and Zurich.

For the first time in the three years that the survey has been administered, more than half of respondents claim to purchase cyber liability insurance.

In response to the question “Does your organization purchase cyber liability insurance?” some 52 percent responded yes, compared to 44 percent in 2012, and 35 percent in 2011.

Only 38 percent said their organization did not purchase this protection, down from 50 percent in 2012 and 60 percent in 2011.

Of those companies that do purchase coverage, some 72 percent have done so for more than three years. This represents a 10-point increase from 2012 suggesting that when organizations purchase the coverage they see enough value to renew it year after year.

Even those companies that have not bought cyber coverage are thinking about it.

Half (53 percent) of survey respondents that do not currently buy cyber insurance are considering purchasing it in the next year – a 28 percentage point increase from 2012.

Advisen notes:

This is an indication of the continued shift in the cyber insurance marketplace, from a product that was interesting but not a necessity to one that is becoming a must have.”

Check out a recent I.I.I. paper on cyber risks.

The impact of a data breach at software maker Adobe appears to be worsening. When it first announced the breach on October 3, Adobe said that cyber attackers had compromised accounts and passwords of nearly 3 million users. Now that number has jumped to at least 38 million users.

What’s more a blog post at PCWorld indicates that a further 150 million usernames and hashed passwords were taken from Adobe. While Adobe says these could include inactive IDs, test accounts and IDs with invalid passwords, the company is still investigating.

PCWorld also reports that the hackers stole source code for flagship Adobe products such as Photoshop, Acrobat, and Reader.

It cites a blog post by Hold Security that suggests the source code theft could have far-reaching security implications.

Here’s the direct quote from the Hold Security blog post:

While we are not aware of specific use of data from the source code, we fear that disclosure of encryption algorithms, other security schemes, and software vulnerabilities can be used to bypass protections for individual and corporate data. Effectively, this breach may have opened a gateway for a new generation of viruses, malware, and exploits.”

Despite the major news headlines about cybercriminals, it’s worth remembering that mistakes made by people and systems actually cause the majority of data breaches.

The 2013 Cost of a Data Breach study by the Ponemon Institute and Symantec, found that negligence and system glitches together accounted for 64 percent of data breaches last year. Such incidents include employees mishandling information, violations of industry and government regulations, inadvertent data dumps, stolen laptops, and wrongful access.

However, U.S. companies represented in this study are apparently continuing to improve their preparation for and response to a data breach.

Both the organizational cost of data breach and the cost per lost or stolen record declined last year, with the organizational cost declining from $5.5 million to $5.4 million and the cost per record from $194 to $188.

Ponemon and Symantec attribute this to more organizations using data loss prevention technologies, fewer records being lost in the breaches and less customer churn.

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