Is the Yahoo data breach cause for concern?

I received the following email in my Yahoo mail account this evening.  I don’t use my Yahoo mail account at all, but the icon flashes once in a while when using other Yahoo services, so I took a look at it.  Apparently, this breach hit about, oh, one billion users (did anyone know that Yahoo had a billion users?).  Here was the notice I got:

NOTICE OF DATA BREACH

Dear ***,
We are writing to inform you about a data security issue that may involve your Yahoo account information. We have taken steps to secure your account and are working closely with law enforcement.

What Happened?

Law enforcement provided Yahoo in November 2016 with data files that a third party claimed was Yahoo user data. We analyzed this data with the assistance of outside forensic experts and found that it appears to be Yahoo user data. Based on further analysis of this data by the forensic experts, we believe an unauthorized third party, in August 2013, stole data associated with a broader set of user accounts, including yours. We have not been able to identify the intrusion associated with this theft. We believe this incident is likely distinct from the incident we disclosed on September 22, 2016.

What Information Was Involved?

The stolen user account information may have included names, email addresses, telephone numbers, dates of birth, hashed passwords (using MD5) and, in some cases, encrypted or unencrypted security questions and answers. Not all of these data elements may have been present for your account. The investigation indicates that the stolen information did not include passwords in clear text, payment card data, or bank account information. Payment card data and bank account information are not stored in the system we believe was affected.

What We Are Doing

We are taking action to protect our users:

We are requiring potentially affected users to change their passwords.
We invalidated unencrypted security questions and answers so that they cannot be used to access an account.
We continuously enhance our safeguards and systems that detect and prevent unauthorized access to user accounts.
What You Can Do

We encourage you to follow these security recommendations:

Change your passwords and security questions and answers for any other accounts on which you used the same or similar information used for your Yahoo account.
Review all of your accounts for suspicious activity.
Be cautious of any unsolicited communications that ask for your personal information or refer you to a web page asking for personal information.
Avoid clicking on links or downloading attachments from suspicious emails.
Additionally, please consider using Yahoo Account Key, a simple authentication tool that eliminates the need to use a password on Yahoo altogether.
For More Information

For more information about this issue and our security resources, please visit the Yahoo Security Issues FAQs page available at https://yahoo.com/security-update.

Protecting your information is important to us and we work continuously to strengthen our defenses.

Sincerely,

Bob Lord
Chief Information Security Officer
Yahoo

After reading this long email, my reaction was to shrug it off.  This was a breach that occurred over three years ago, and some of the information taken (“…names, email addresses, telephone numbers, dates of birth…”) isn’t what I consider to be overly private.  What could be more alarming is the theft of “encrypted or unencrypted security questions and answers”.  Armed with this information, fraudsters could potentially gain access to sensitive accounts.

I typically try to avoid using the same security questions when I need to fill them out on secure sites, but this may be relatively difficult when dealing with services that require users to answer questions from a specific list (e.g. “what is your mother’s maiden name?”).

I think that a better approach for security questions may be to allow users to generate both the question and the answer.  Using this, I might generate my own question like “What is your favorite restaurant in the city of New York?”  I would then generate my own answer, and chances are it would be a question that I would not again repeat on a different site.  I think I have seen this kind of approach offered in the past, but it is by no means widespread.

Anyway, it seems like we see major breaches like what happened to Yahoo on a semi-regular basis these days, and there will probably not be an end to these going forward.