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The Economic Case for Cyberinsurance

Jay P. Kesan, University of Illinois College of Law
Rupterto P. Majuca, Department of Economics, University of Illinois at Urbana-Champaign
William J. Yurcik, National Center for Supercomputing Applications, University of Illinois at Urbana-Champaign

Article comments

This paper will be published in the Proceedings of the Symposium on "Securing Privacy in the Internet Age," Stanford University, March 2004.

Abstract

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.

Subject Area

Law and Economics

Recommended Citation

Jay P. Kesan, Rupterto P. Majuca, and William J. Yurcik, "The Economic Case for Cyberinsurance" (July 2004). University of Illinois Legal Working Paper Series. University of Illinois Law and Economics Working Papers. Working Paper 2.
http://law.bepress.com/uiuclwps/papers/art2

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