The Impact of Risk Perception on Cyber Insurance in the Era of Digital Transformation

Risk management entails various measures for lowering risks to a level deemed acceptable by an organization and enabling residual risk to be transferred to insurance providers. The effectiveness of these measures is heavily reliant on people’s perceptions of the threats to which they are or may be exposed. However, little is known regarding the connection between risk perception and cyber insurance. Therefore, the purpose of the research in this chapter is to examine the role of risk perception in determining people’s cyber risk-taking behaviors and the related implications for cyber insurance policies and dynamics. This study provides a high-level analysis of the existing risk perception literature through a detailed examination of social, demographic, economic, cultural, psychological, and performance factors. The findings suggest that the nature of the relationship between risk perceptions and cyber insurance benefits may be influenced primarily by an organization’s ability to keep its risk profile stable over time. More specifically, the cultural dimension of risk perception has been identified as one of the areas where risk reduction strategies have the most significant potential for lowering cyber insurance costs. The findings of this study can assist businesses and insurance companies in directing training efforts and forecasting organizational reactions to cyber threats as they navigate digital transformation.