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Cyber Risk Insurance: Data Breaches in Healthcare Industry Getting Worse with Increase Use of Mobile Devices, Sloppy Data Handling


Data security in the healthcare industry is getting worse despite increased compliance with the HITECH Act and other federal regulations. Just look at the second annual benchmarking study released by the Ponemon Institute which shows that the frequency of data breaches in healthcare have increased 32% in the past year and cost the industry an estimated $6.5 billion annually.

Behind the data security breaches is sloppy employee handling of data and the ever-increasing use of mobile devices in the healthcare setting. Forty-one percent of healthcare executive surveyed attributed data breaches related to protected health information (PHI) to employee mistakes, while half of the respondents said their organization does nothing to protect the information contained on mobile devices. In all, 80% of healthcare organizations use mobile devices that collect, store, and/or transmit some form of PHI.

Third-party mistakes, including those by business associates, account for 46% of data breaches reported in the study. According to 49% of respondents, lost or stolen computing or data devices are the reason for healthcare data breach incidents.

What’s more, respondents of the study reported that the average economic impact of a data breach was $2.2 million, up 10% from last year. In addition, most believe their organization has suffered from time and productivity loss (81%) followed by brand or reputation diminishment (78%) and loss of patient goodwill (75%). The potential result is patient churn; the average lifetime value of one lost patient (customer) is $113,400, an increase from $107,580 in last year’s study.

Employees are the group most likely to detect the data breach, according to 51% of participants. However, more than one-third (35%) of respondents say that data breaches were discovered by patient complaints. Once a breach is discovered, 83% of hospitals say that it takes in excess of one to two months to notify affected patients. Twenty-nine percent of respondents say their data breaches led to cases of identity theft, a 26% increase from last year.

According to Dr. Larry Ponemon, chairman and founder, Ponemon Institute, “Healthcare data breaches are an epidemic. These problems are a direct result of our national economy. Healthcare organizations – especially not-for-profit hospitals and small clinics – have thin margins, are trimming staff and resources and are lacking sufficient security and privacy budgets needed to adequately protect patients. I don’t see this getting better anytime soon.”

Regardless of the industry you’re in, cyber crime is a big issue. Axis can help you implement risk management techniques to mitigate losses in addition to providing you with the Cyber Risk insurance coverage you need to protect your organization should a loss occur.

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Blogged on: December 6, 2011 by Mike Smith
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