As e-commerce and use of the Internet for commercial transactions has grown, so too has the sale of so-called “cyber-insurance.” This insurance product began to develop in the 1990s as companies increasingly recognized that failure to engage in commercial Internet transactions put them at an enormous competitive disadvantage, both with respect to the ability to service consumers and clients and in the ability to collect data regarding consumer interests and needs. Well-established “hard” companies like Borders Books and others fatally failed to keep pace with their competitors’ electronic presence and transactions. Clearly, there is now a critical dependence on e-commerce.
Dependence on e-commerce, however, comes with risks. The Internet was designed—to the extent it was designed—as a method of transmitting data across multiple networks. The use of such a system necessarily requires that a company grant access to others, over whom it has no control, to at least some aspects of the company’s transmitted data. And participation in the system necessarily requires that others, over whom one has no control, for at least a while input data into at least part of a system upon which one depends. Using e-commerce therefore subjects a company to the risk that others will take control over its ability to communicate and to engage in transactions with its consumers and clients. Hence the need for insurance designed to address the risk associated with e-commerce.
