Does a data breach cost an average of 58 cents a record -- or $154?
That's a significant difference for companies preparing incident response plans, as well as for insurance companies, regulators, auditors and others looking to ensure that companies are adequately prepared or covered for such an event.
Ponemon Institute's $154 number is based on an analysis of 350 companies that suffered breaches in 2014, and uses an analytical model based on the real costs of a breach that the company has been refining for a decade.
Verizon's 58 cents calculation is based on 191 insurance claims filed in 2014, and this is the first year that Verizon has run these numbers.
In addition to different data sources, Ponemon also includes indirect costs, while Verizon's does not.
But Verizon's estimate seems unreasonably low, said Caleb Barlow, vice president at IBM Security. IBM sponsored this year's Ponemon report.
Caleb Barlow, vice president at IBM Security
At a minimum, a company with a data breach has to send out letters notifying customers that they were breached and pay for credit monitoring, he said.
"Normally, Verizon does some great work," he said, "But we had to discount this because 58 cents doesn't even cover the cost of the postage and printing the letter."
How useful are insurance claims?
Companies usually don't have enough insurance coverage to cover the total cost of a breach, said Larry Ponemon, chairman and founder of the Ponemon Institution, and the insurance doesn't cover indirect costs or loss of business.
For example, he said, Target's latest breach is estimated to cost the company over $1 billion, but it was only insured for $100 million.
In general, he said, companies buy enough insurance to cover 50 percent of the value of their fixed assets -- but only 12 percent of the value of their digital assets, according to a study released last month by Ponemon and sponsored by Aon Plc, a global insurance brokerage.
In addition, Ponemon said, companies typically have deductibles in place, to lower the costs of their insurance premiums.
"That's enough reason why using insurance payouts as a surrogate for cost is really erroneous," he said.
But Jay Jacobs, senior analyst, RISK Team at New York City, NY-based Verizon, argues that there's no evidence that companies are under-insuring their cyber assets.
If companies were under-insuring, he said, then they'd be likely to hit their coverage cap when they file a claim.
"That cap would be a round number, like half a million dollars, or a million," he said. "That round figure would show up as a pattern."
Plus, he said, the cap would only make a difference in the largest breaches, and those are excluded from Ponemon's report.
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