Now you can get extra protection from hackers -- if you're worth $5M

Insurance company AIG is the latest carrier to wage war against hackers, extortionists and identity thieves who have infiltrated American businesses and homes. The catch? You must be worth $5 million to purchase this financial protection, which is an add-on to an already existing homeowners’ policy.

Once the nation’s largest insurer, and still among the top 10 in the property-casualty market, AIG has amassed an arsenal of services for those who can afford it: data restoration after a cyberattack; reimbursement for cyber-extortion, commonly known as “ransomware”; services if your reputation or good name has been “flamed;” and help for those -- particularly children and teenagers -- who’ve been “cyberbullied.”

Equally important, the insurance product includes an in-home assessment of your cyberrisk to show the weak points and provides a “threat assessment.” Thereafter, a monthly monitoring service, called “Privacy Pulse,” goes into effect to keep the home safe.

AIG isn’t the first insurer to offer this type of protection to families. Last April, Chubb, now a unit of Ace Insurance, announced an improved “family protection program” that focused on cyberbullying, usually a crime by teens against other young people that sometimes leads to suicide. But the fact that other insurers are headed in this direction proves just how serious this threat has become as laptops, cellphones, tablets and devices such as Amazon’s “Echo” invade our everyday lives.

“The prevalence of smart applications and other technology has created exposure and risks that today’s households are not well prepared to manage,” said Tracie Grella, global head of cyber risk insurance at AIG.   

Shortly after the presidential election, First Lady Melania Trump announced that one of her top priorities would be to combat cyberbullying. The Cyberbullying Research Center claims that a quarter of all students say they’ve been attacked online, and 16 percent admit to having done it themselves.

Insurers like AIG and Ace are already in the business of insuring companies against losses from cyberattacks, which estimates show cause losses of as much as $400 billion a year. But now AIG is moving downscale and offering the same firepower to its wealthy policyholders in the personal insurance market.

Among its resources is K2 Intelligence, a worldwide investigations and cyber defense firm originated and managed by Jules Kroll, whom The New Yorker magazine once described as “the secret keeper.” Also on tap for AIG’s private client group is data and identity defense firm CyberScout.

“Insurers are very opportunistic when they think people are afraid of something,” said Robert Hunter, the director of insurance at the Consumer Federation of America (CFA). But he sounded a note of caution. “New coverages offered at a time of fear are usually way overpriced and have a lot of exclusions.” 

His advice: read the policy carefully -- or have your lawyer read it.

A recent report on identify theft services by the U.S. General Accounting Office (GAO) says there are limits to the amount of protection you can get from cyberthreats – even as a major corporation. The products offer restitution, but no guarantee of future safety.

For example, credit monitoring services can help detect new account fraud, but don’t prevent or address existing account fraud, the GAO said. Identity monitoring can alert consumers to a problem, but it’s effectiveness in mitigating it is “unclear.” 

A company’s ability to restore your identity depends on its level of service. Some firms offer to deal with creditors on your behalf, while others simply provide information of how to “do it yourself.” As for identity theft, “the number and dollar amount of claims has been low,” according to the GAO.

So just how much will AIG’s service help? Probably a lot, since its price and the resources it provides exceed the level that most of us can afford. The insurer says that it is looking to broaden the service more widely in the future.

But its most important function is putting up fences that “keep the family safe,” according to Jerry Hourihan, president of the private client group for the U.S. and Canada, so as “to proactively reduce cyberattacks before they happen.”

For those who can afford it that kind of comfort could be worth the price; for the rest of us it’s probably wishful thinking.