On the evolution of data breach reporting patterns and frequency in the United States: a cross-state analysis

TL;DR

This study analyzes data breach reporting patterns and frequency trends across eight U.S. states with established laws, revealing stable pre-2020 breach rates and increasing post-2020, with insights into reporting delays and state-specific differences.

Contribution

It provides a consistent, comparative analysis of breach frequency over time across multiple states, accounting for reporting standards and uncovering new trends in breach severity and reporting delays.

Findings

Reporting delays are lengthening over time.

Breach frequency was stable before 2020 and increased afterward.

Significant differences in breach trends across states and severity levels.

Abstract

Understanding the emergence of data breaches is crucial for cyber insurance. However, analyses of data breach frequency trends in the current literature lead to contradictory conclusions. We put forward that those discrepancies may be (at least partially) due to inconsistent data collection standards, as well as reporting patterns, over time and space. We set out to carefully control both. In this paper, we conduct a joint analysis of state Attorneys General's publications on data breaches across eight states (namely, California, Delaware, Indiana, Maine, Montana, North Dakota, Oregon, and Washington), all of which are subject to established data collection standards-namely, state data breach (mandatory) notification laws. Thanks to our explicit recognition of these notification laws, we are capable of modelling frequency of breaches in a consistent and comparable way over time. Hence, we are able to isolate and capture the complexities of reporting patterns, adequately estimate IBNRs, and yield a highly reliable assessment of historical frequency trends in data breaches. Our analysis also provides a comprehensive comparison of data breach frequency across the eight U.S. states, extending knowledge on state-specific differences in cyber risk, which has not been extensively discussed in the current literature. Furthermore, we uncover novel features not previously discussed in the literature, such as differences in cyber risk frequency trends between large and small data breaches. Overall, we find that the reporting delays are lengthening. We also elicit commonalities and heterogeneities in reporting patterns across states, severity levels, and time periods. After adequately estimating IBNRs, we find that frequency is relatively stable before 2020 and increasing after 2020. This is consistent across states. Implications of our findings for cyber insurance are discussed.