Data security; Surveys: data losses spur consumer flight.

• Author: Marshall, Jeffrey

Two new surveys find customers are actively punishing companies that lose their confidential and private information. Conducted by the Ponemon Institute[C] and distributed by PGP Corp., the surveys find that almost 20 percent of customers immediately terminated their accounts with vendors that lost their information, and an additional 40 percent considered termination. Companies participating in a parallel study estimated incurring an average cost of $14 million per breach incident, with costs ranging as high as $50 million.

The survey--Lost Customer Information: What Does a Data Breach Cost Companies?--claims to be the first of its kind to report data from actual cases of lost customer data and the associated costs incurred to recover. Covering 14 separate incidents, it represents 1.4 million compromised data records and almost $200 million in total costs. (Total cost estimates include the actual cost of internal investigations, outside legal defense fees, notification and call center costs, public relations and investor relations efforts, discounted services offered, lost employee productivity and the effect of lost customers.)

The related survey--National Survey on Data Security Breach Notification--reports results from 9,000 consumers, 12 percent of whom had received notifications of information mishandling. When extrapolated to the U.S. population, an estimated 23 million consumers have received such notices. Results showed 60 percent had terminated or were considering terminating their accounts. (The reports are available from PGP at www.pgp.com/ponemon.)

"The increasing incidence of reporting of lost private personal records poses a serious threat to consumer confidence--and to vendor profits," said Esther Dyson, editor of Release 1.0 for CNET Networks and a member of the PGP Business Advisory Board. "Yet it is the right thing...