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Data Breach, Privacy, and Cyber Insurance: How Insurance Companies Act as “Compliance Managers” for Businesses

Published online by Cambridge University Press:  27 December 2018

Shauhin A. Talesh
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Abstract

While data theft and cyber risk are major threats facing organizations, existing research suggests that most organizations do not have sufficient protection to prevent data breaches, deal with notification responsibilities, and comply with privacy laws. This article explores how insurance companies play a critical, yet unrecognized, role in assisting organizations in complying with privacy laws and dealing with cyber theft. My analysis draws from and contributes to two literatures on organizational compliance: new institutional organizational sociology studies of how organizations respond to legal regulation and sociolegal insurance scholars' research on how institutions govern through risk. Through participant observation at conferences, interviews, and content analysis of insurer manuals and risk management services, my study highlights how insurers act as compliance managers for organizations dealing with cyber security threats. Well beyond pooling and transferring risk, insurance companies offer cyber insurance and unique risk management services that influence the ways organizations comply with privacy laws.

Type
Articles
Information
Law & Social Inquiry , Volume 43 , Issue 2 , Spring 2018 , pp. 417 - 440
Copyright
Copyright © American Bar Foundation, 2018 

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