Not too surprisingly, the venture capital folks see data breach prevention and response services as a growth opportunity. Today’s Wall Street Journal ran an article by Pui-Wing Tam and Ben Worthington entitled Funds Invest in Privacy Start-ups. We think that these investors are on to something, as we have seen strong signals by insureds and potential insureds that breach services are one of the compelling reasons why they buy Cyber Risk policies. Not only do insureds value the risk transfer component of the policy, they especially value the turn-key, pre-negotiated response services that often accompany the policy.
The many providers of breach-related services are in a dog fight as they try to gain prominence in an increasingly crowded market. Insurance companies will be providing a valuable service to their insureds as they help separate the quality providers from those that may not be as competent.
This does lead us to a cautionary note: we hope that Cyber Risk insurers don’t support services that are inexpensive but ineffective. So far, we don’t see any signs that they are falling for such temptation, but we appreciate the significant expense control pressure on insurers.
Note that we have just released our Cyber Risk Insurance Market Survey 2010, which includes extensive discussion of the breach-related services available to buyers of cyber risk insurance, including the companies that provide the services. More about this Report shortly.