Connected Homes Heighten Need for Personal Cyber Insurance

Eight out of ten U.S. consumers have a home data network and more than a third of them connect entertainment systems, gaming consoles and other smart devices to the Internet.

The same survey suggests that all of this connectedness is increasing the risk of home cyber attacks.

According to the survey from The Hartford Steam Boiler Inspection and Insurance Co. (HSB), of the 81 percent of consumers who said they have a WiFi or other home data network, 38 percent had electronic devices other than personal computers, smartphones or tablets connected to the Internet. The connected devices include smart televisions, music systems, thermostats, security cameras, door locks, alarms, lighting, home automation and other smart devices.

Although cyber attacks on non-computing home systems and smart appliances are so far relatively uncommon (10 percent of those responding were victims), the increase in connected devices is creating a new pathway for hackers and cyber thieves, the results showed.

“Cyber criminals are always looking for new targets,” said Timothy Zeilman, vice president and counsel for HSB, which insurers data and information risks and sells cyber coverage for consumers. “And home devices like smart TVs and appliances are often designed for easy use and not security. Compounding the problem, many consumers don’t take even basic measures such as changing default passwords and updating security software.”

The most common type of non-physical damage experienced through attacks on home devices, appliances and systems were viruses or other unwanted software on their systems (59 percent) and damage to software or operating systems (45 percent).

Damage to home devices in a cyber-attack usually results in a financial loss, the survey showed, with 87 percent of the victims spending money to respond. The losses were often substantial — 42 percent of the victims in the survey spent between $1,000 and $5,000.

A recent study for Assurant Inc., which sells coverage for mobile devices, revealed that consumers are excited by the progression toward connected living and the many ways these technologies improve their lives. However, the study, which was unveiled at the 2017 Consumer Electronics Show, also showed growing concerns about the risks that can accompany a connected lifestyle. Despite the benefits of all of their home-based and personal connections, more than 60 percent of respondents said they were either “terrified” or “very concerned” about identity theft and cyber attacks, while 42 percent expressed concerns over privacy.

The problem will likely get worse as the number of connected home devices increases, HSB’s Zeilman said.

In response, insurers are developing new cyber insurance coverages for individuals that can pay for expenses related to cyber attacks on home computers, home systems, and appliances and other connected devices, cyber extortion, data breach and online fraud.

Insurers have been testing smart home gadgets, including connected water sensors, smoke detectors, door bells and other smart technologies, according to a report by Insurance Journal on the evolving homeowners insurance market.

A 2015 household insurance study by JD Power found that 31 percent of homeowners indicated their home used at least one smart technology product. In a 2016 August Home and Xfinity Home survey, nearly 18 percent of survey respondents indicated they would likely purchase a new smart home product in the next 12 months.

The HSB survey was conducted for the insurer by Zogby Analytics. Hartford Steam Boiler (HSB) is a Munich Re company and specialty insurer providing equipment breakdown, other specialty coverages, inspection services and engineering-based risk management

Related:

• One-Size Doesn’t Fit All in Today’s Evolving Homeowners Market
• Why Insurers Must Pick Up Their Technology Pace
• Can Your ‘Smart’ Appliances Be Trusted with Your Personal Data? Probably Not…