Data Breach Shows Importance of Cyber Liability Insurance

The disclosure of a data breach at  payment  processor  Global Payments has left credit card giants Visa and Mastercard warning that some of the private data of their cardholders may have been exposed.

In a statement, Global Payments said it believes the affected portion of its processing system is confined to North America and less than 1.5 million card numbers may have been exported:

The investigation to date has revealed that Track 2 card data may have been stolen, but that cardholder names, addresses and social security numbers were not obtained by the criminals. Based on the forensic analysis to date, network monitoring and additional security measures, the company believes that this incident is contained.†

The New York Times reports that  while far from the largest breach of credit card data in recent years, this latest incident underscores concerns about the vulnerability of electronic financial data.

Readers may remember the disclosure of a similar data breach at another credit card processor, Heartland Payment System back in 2009. That breach began in 2007 and exposed the data on 130 million credit cards. Heartland estimated breach-related expenses at $140 million, including fines, settlements and legal fees.

A benchmark study of 51 U.S. companies by the Ponemon Institute found that the average cost of a data breach increased to $7.2 million in 2010, up 7 percent from $6.8 million in 2009. The average breach cost companies $214 per compromised record up from $204 in 2009, it found.

Despite the fact that cyber risks and cyber security are widely acknowledged to be a serious threat, a majority of companies today still do not purchase cyber liability insurance. However, a recent I.I.I. paper indicates that this is changing.

It’s worth noting that ID theft remains the number one consumer complaint received by the Federal Trade Commission (FTC), accounting for 15 percent of all fraud complaints in 2011. Some 279,156 identity theft complaints were reported to the FTC in 2011, up 11 percent on the previous year.

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

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