Three Economic Arguments for Cyberinsurance
Chapter 16, Securing Privacy in the Internet Age, A. Chander, L. Gelman, & M. J. Radin, Stanford University Press, pp. 345-366, 2008
22 Pages Posted: 18 Aug 2004
We present three economic arguments for cyberinsurance. First, cyberinsurance results in higher security investment, increasing the level of safety for information technology (IT) infrastructure. Second, cyberinsurance facilitates standards for best practices as cyberinsurers seek benchmark security levels for risk management decision-making. Third, the creation of an IT security insurance market redresses IT security market failure resulting in higher overall societal welfare. We conclude that this is a significant theoretical foundation, in addition to market-based evidence, to support the assertion that cyberinsurance is the preferred market solution to managing IT security risks.
Keywords: Cyberinsurance, liability, internet security
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