From The Hill
As we move beyond the widespread acceptance and use of online banking and trading platforms and push further into an increasingly digital financial marketplace, consumers face new forms of risk—namely, cyber risk—that would have been unfathomable previously. When confronted with risks that could be financially devastating, consumers are driven to mitigate and insure against such perils. Has the time come to purchase insurance for financial cyber risks?
Rational consumers seek to prevent, minimize or avoid adverse financial outcomes by purchasing insurance to protect against actual and perceived risks they can’t easily afford. Insurance essentially serves as a risk management and wealth preservation tool. However, consumers realize that it doesn’t make sense to purchase insurance when the cost of coverage is so high that they will pay substantially more in premiums than expected losses. In other words, they decide that self-insuring is the more cost-effective alternative.
Individuals today are increasingly concerned about their online security but don’t have a clear understanding of the amorphous yet perilous risks they face. In response, new consumer-directed insurance products are being offered to guard against cyber attacks.