The following post was co-authored by Jennifer Huddleston Skees, a legal research assistant at the Mercatus Center at George Mason University.

What do you get the modern friend who has everything, and thus everything to lose? How about a hand-wrapped, tinsel-infused personal cyber insurance policy?

The market for commercial cyber insurance for businesses is already fairly robust and still growing rapidly. Now, a market for personal cyber insurance is emerging in response to risks associated with the ever-growing internet of things. Such offerings empower individuals to defend themselves against ransomware, identity theft and eventually could evolve to include coverage for any hypothetical digital threat that the writers of Netflix’s Black Mirror can imagine.

Worried that the new gadget you got for the holidays leaves you at increased risk of identity theft? Think Alexa might be spying on you? Concerned about exposing the intricacies of your biome to 23 and Me? A personalized solution awaits. Some policies even cover homeschooling for children affected by cyberbullying.

In general, these policies have come in one of two formats. American International Group has begun offering a standalone personal cyber insurance line. The other type of personal cyber insurance is offered as an endorsement or rider to a homeowners policy. For example, Chubb now offers coverage as part of its enhanced “family protection” product that allows for recovery for cyberbullying or other cybersecurity harms that result in a quantifiable injury. Like most new insurance products, there is still a good deal of variance in terms of policy limits and specific coverages.

Right now, most of these policies are targeted at wealthy individuals. But as risk profiles and data about the frequency, severity and cost of attacks become available, the prices of insurance policies will be more accurate and the type and number of insurance policies will expand. For most people, existing policy offerings do not make sense, because cybercriminals target databases or individuals with high-value information. However, in the future, they could become more commonplace.

While more than 84 percent of people surveyed report having concerns about online privacy or cybersecurity, few actually take proactive steps to mitigate these risks. Because consumers by and large aren’t protecting themselves, some advocates have called for governments to step in and regulate the privacy and security features of devices. Policymakers cite consumer protection as a reason to use taxpayer dollars to pursue restrictive regulations on privacy and the internet of things.

The growing availability of personal cyber-insurance options could empower consumers to protect themselves, and they provide a better solution than regulations that could impede innovation. Providing optional coverage with the existing insurance products we already buy, such as homeowners’ and renters’ insurance, could serve to spark a conversation about what is available. Rather than forcing a one-size-fits-all solution on society, these products allow individuals to select policies that fit their needs.

In these early stages, personal cyber insurance will appeal mostly to those who are truly risk-averse or who have a lot to lose. And investing in personal cyber insurance coverage likely won’t ever be as exciting as unwrapping a set of his and hers light sabers. But if you’re doing some last-minute shopping for the digitally savvy, you can now give the gift of security and peace of mind this holiday season with a two-pack of guaranteed compensation for cyber-related loss!

Image by Photon photo


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