Mitigating security breaches through insurance: Logit and Probit models for quantifying e-risk
The common e-threats deterring ecommerce are identity theft, hacking, virus attack, graffiti, phishing, Denial of Service (DoS), sabotage by disgruntled employees, loss of laptop, financial fraud and telecom driven frauds. These discourage users from online transactions. Organizations spend millions of dollars to implement the latest perimeter and core security technologies, to deter malicious attackers and to ensure confidentiality, integrity and availability of data. Yet, security breaches are common. It results in loss of opportunity cost, market capitalization and brand equity for organizations. We propose e-risk insurance as a strategy to supplement the security technologies, and to mitigate these financial losses. In this paper, we propose two generalized linear models (GLM) namely Logit and Probit for quantification of the probability of an e-threat, using CSI/FBI data. We also compute the expected loss amount for organizations using collective risk model. Based on it, we ascertain the net premium to be accrued to the insurance companies.
Mukkhopadhyay, Arunabha and Shukla, G K., "Mitigating security breaches through insurance: Logit and Probit models for quantifying e-risk" (2009). AMCIS 2009 Proceedings. 767.