The Terrifying True Cost of Data Security Liability

How secure is your data? Do you know the potential cost of a data security breach? It can, in fact, be terrifyingly high as the State of Utah learned the hard way.

Following a breach in 2012, during which personal information and Social Security Numbers of over 780,000 resident was compromised, the cost for the state is estimated to run into hundreds of millions of dollars. It was a very simple mistake anyone could have made, which means these costly consequences could also to happen any unprepared business or individuals.

Security Breach

The breach came late in March, when a technician at the State’s Technology Services department brought a Medicaid server online without changing the default factory password. Because of this, hackers were able to download Medicaid information including privately insured individuals and the social Security Securities of 280,000 individuals.

It is estimated that one in four victims of a security breach will fall victim to fraud or identity theft. This risk is particularly high in the Utah case as the compromised Social Security numbers may be used to open up lines of credit or change online passwords. The case was singled out as the focus of strategic analysis as it highlighted the large-scale consequences of a seemingly small mistake.

Cost of Liability

The cost of this security breach to the state has been alarmingly high, estimated at $406 million. The costs are widely spread. The Technical Services Department are to conduct a review and audit of the state server security, costing $1.2 million and have plans for $4.4 million worth of upgrades.

The Department of Health has spent $3.4 million for an ombudsman, provision of a hotline and information campaigns for victims of the breach. Almost $2 million will be spent providing two years of credit monitoring for those whose Social Security numbers were compromised.


Few businesses will operate on a scale such as the Utah Medicaid system, however the risks remain the very same. Dealing with any amount of data, especially that of others, imposes a great responsibility on a business to duly protect and secure this data.

Many businesses opt to purchase privacy and network security insurance on top of implementing a number of technical solutions to reduce their liability and manage the risk of a security breach.

Have these figures raised some queries about your own data security? How do you manage your data security liability?

If you need advice on your business insurance policy, click here to ask an expert

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