In this digital era, computers and mobile phones manage almost everything. Even our bank and investment transactions are dependent on them. Now, the internet is livelier as cryptocurrencies continue to capture our utopian imagination. Although they appear to upend the financial system, their hype will not falter soon.
It is not surprising that cyberattacks are persisting and becoming more frequent. Even cautious individuals are falling into the trap of hackers and fraudsters. The increased inflow in the crypto market means more theft and hacking incidents. As such, cyber insurance is expected to become another milestone in the industry.
The Cyber Insurance Industry
With more businesses engaged in computers, data breaches are becoming more common. These are estimated to cost $1 trillion every year globally. Despite the caution, anti-hacking software appears inadequate at times. That is why customers are seeking extra protection through cyber insurance.
Cyber insurance is still in its infancy despite being in the industry for two decades. Yet, it remains an enormous contribution to the technology and financial sector.
In essence, it provides financial protection for victims of cyberattacks, including hacking. It covers legal, and IT expenses. Also, it assists individuals in restoring their identities and recovering compromised data.
From 2016-2020, its global market size has increased at a slower rate. But in 2020, it has sped from $5.25 billion to $7.40 billion, giving a 34% growth rate. Indeed, the industry has benefited from the impact of the pandemic.
Due to remote work setups, more businesses are more likely to value cyber insurance. Now that we are in the new normal, it may expand further as estimated by Global Data. Projections using the Linear Trend Analysis are more conservative but also exude optimism.
Meanwhile, in Canada, 26% of companies were able to stop cyberattacks. It is no wonder why it ranked 13th out of over 70 countries in terms of cybersecurity. Even so, businesses are not letting their guard down.
Eighty-four percent of Canadian companies have cyber insurance in their policies. Sixty-two percent of them have coverage against ransomware. This is a more threatening form of cyberattack.
Mutualism Between the Crypto Market and Cyber Insurance
The world of cryptocurrency has always been filled with questions and criticisms. Even so, its popularity continues to grow and captures our interest.
It appears to be digital gambling, but believers see it as a way to a decentralized financial system. With more people joining the bandwagon, cyberattacks remain on the rise.
From 2016 to 2018, stolen cryptocurrencies increased from $760 million to $1.7 billion. In 2019, the value of stolen cryptocurrencies more than doubled to $4.5 billion.
Its leading contributors include scams, fraud, and hacking. In 2020, the value of stolen cryptos decreased to $1.9 billion. But it remained higher than the average of $1.6 billion in the previous years.
The figures are worrisome, but cryptocurrencies are not considered legal tender. As such, deposit insurance corporations do not cover crypto users. Yet, several companies are implementing new insurance policies with a dynamic limit. The coverage moves in line with the crypto price changes.
Now, the crypto market is geared towards cyber insurance. It can help at a larger scale by securing blockchains and even the whole crypto exchange. As such, data breaches can be reduced, and crypto transactions will be safer. It also helps recover compromised data and repair damaged computer systems.
On a smaller scale, it can block hacking and theft attempts on cryptos in wallets. Also, having cyber insurance alerts crypto users about a data breach. It will give an instant notification, avoiding hacking and other cyber attacks. In case of a breach, users and admins may restore the identities of affected individuals.
In the aftermath of the incident, they will receive financial compensation. This includes the coverage for legal expenses and IT fees. Repair costs and reputational harm are also covered. As such, cyber insurance is a cost-effective way to protect crypto users and exchanges. It ensures the safety of crypto transactions and the market as a whole.
Likewise, the crypto market will spur growth in the cyber insurance industry. As the hype continues, the market expands further. More crypto exchanges and users are entering the market. Cyber insurance can be a complement to the crypto market, which can increase demand.
Also, there are untapped potentials in Oceania, Latin America, and the Middle East. The emergence of crypto usage in those regions can show the sustained growth of the market. Some estimations show that it may comprise 10% of the global GDP in the coming years. In turn, cyber insurance may grow along with it.
Tips For Safe Cryptocurrency Transactions
Ignore Suspicious Messages
Phishing scams and malicious messages are common in emails and social media platforms. Be careful when reading messages from unknown senders. If there is a link included in the message, do not click it right away. Many victims of hacking and scams clicked on those links.
In short, your cryptocurrency wallet is just a click away from fraudsters and hackers. If you are familiar with the ILOVEYOU Virus, you will understand it better. The damage, including the removal of the worm, exceeded $10 billion worldwide.
Change Your Password Regularly
Over 70% of millennials in the US use one password on many apps, accounts, and devices. The same study shows that less than 2% are confident about the strength of their passwords. With that, change your crypto wallet password as often as you can. Use a strong or complex one as much as possible. If you are using multiple wallets, use a different password per wallet.
Maintain Multiple Wallets
Having multiple crypto wallets is like putting eggs in different nests. Think of it as portfolio diversification. In the stock market, it is a technique for growth and safety. For cryptocurrency, use one wallet for your usual crypto transactions. The other one is where you store the rest of your coins. In case of hacking, you can protect a part of your investments.
Cyber insurance is still in its infancy, but its advantages have been evident. Although there are gaps to fill, it is still doing fine. With the increased digital transactions, its growth is inevitable. Having one for cryptocurrency transactions is a strategic move on your part.