Here’s an example of online insurance: BuySAFE insures online transactions up to $25,000. They do due diligence on merchants and bond them for up to that amount. Their partners include eBay for online markets and Liberty Mutual as the bond issuer.
The founder, Steve Woda, used to be a surety bond underwriter. Woda says his inspiration was when he bought a PDA on eBay and got ripped off. Instead of whining, he started a company to deal with it. Apparently he went to the Wharton School of Business at the University of Pennsylvania to learn how to do a startup that he originally called BondMyAuction. The president of BuySAFE is Jeff Grass, who formerly founded PayMyBills.com, since sold to PayTrust.
BuySAFE is more evidence that Dan Geer, Bruce Schneier, and Hal Varian have been right all along: the future of Internet security is insurance. Or, when security becomes a matter of credit or operational risk beyond the control of a single company, risk management is the answer, and insurance is one of the first forms of financial risk transfer that can implement risk management.
-jsq
PS: Thanks to Bob Stratton (CTO, Revive Systems, Inc.) for the pointer.
Security <> Insurance
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