Stop for a moment and consider how much your life is conducted through the internet. Our business communication, our banking, and our social interactions are all online and connected by email, document storage, social media, websites...and accessible from a variety of different platforms: smartphones, laptops, iPads and PCs. The internet has given us an unprecedented level of access and connection, and it’s rapidly expanding. But with all the upsides, there is a downside - and it, too, warrants our attention.
The growth of connectivity has brought with it the growth of cybercrime. According to the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (SBTT) programs (powered by SBA.gov), "Cybercrime costs the global economy about $445 billion every year, with the damage to business from theft of intellectual property exceeding the $160 billion loss to individuals." Obviously, cybercrime can be enormously expensive. For a business, it can be catastrophic.
What Is Cyber Insurance?
Cyber liability insurance is an increasingly important type of coverage for businesses in today's digital world. With the rise of cyber attacks and data breaches, companies are facing a growing threat to their sensitive information and financial stability. But what exactly is cyber liability insurance and do you need it for your business?
In simple terms, cyber liability insurance is a type of policy that provides protection for businesses in the event of a cyber attack or data breach. It covers financial losses, such as business interruption costs and expenses related to recovering from the incident, as well as legal fees and settlements that may arise from any lawsuits resulting from the breach.
But do you really need cyber insurance? The short answer is yes.
Regardless of the size or industry of your business, no organization is immune to cyber threats. In fact, small and medium-sized businesses are often targeted by hackers due to their perceived lack of security measures compared to larger corporations.
Financial Cost of Cyber Crime
For businesses: there are the direct costs of a cyber breach can include:
- Monetary theft. Cyber thieves can intercept bank transfers and transfer money out of company accounts.
- System repair and remediation. Software will have to be reinstalled after a cyberattack. In some instances, it is possible for a hacker to physically destroy a computer or server, usually in retaliation when the ransom is not paid.
- Legal fees. Businesses that lose customer data in a cyberattack are targets of lawsuits. They need legal counsel as soon as they are aware of cybercrime.
- Publicity fees. It's usually not a good idea for small businesses to announce cyber breaches on their own. The advice of a publicist or public relations representative specializing in reputation repair is usually a good investment.
- Notification fees (businesses should seek legal advice before notifying customers their data was lost in a hack attack), credit restoration fees, and credit monitoring fees for affected customers.
- Regulatory fees. Especially for medical practices, fines for loss of data in cyber breaches regardless of fault can be a crippling expense.
- Overtime. State laws may set tight deadlines for notifying affected parties of a data breach. It may be necessary to pay employees overtime to meet these deadlines,
- Higher insurance premiums. Every small business should have cyber insurance to cover the expenses caused by an attack. A cyber attack will make premiums go up.
Indirect Cost of Cyber Crime
And that’s not all. Cyber breaches can also result in indirect costs to small businesses:
- Business disruption. If systems are down when an invoice passes 30 days, a discount may be lost. If systems are down when a creditor who has not been paid in any months issues an ultimatum, avoidable litigation may result. Businesses can miss opportunities to secure scarce inventory or fail to deliver rush orders.
- Loss of customers. Customers whose banking information credit card numbers and Social Security numbers wind up in the hands of hackers understandably may discontinue their patronage. And even the most patient customers will not be able to put in new orders while systems are down.
- Loss of intellectual property. Confidential memos may become public knowledge. Trade secrets may be sold. Plans may be leaked to competitors.
- Damage to the company brand, credibility, and reputation. Brands take years to create. A cyber breach can cause irreparable damage to a brand and reputation in just minutes.
What does cyber liability insurance cover?
While policies may vary, typical coverage includes data breaches, network outages caused by cyber-attacks, loss of income due to business interruption, extortion attempts (such as ransomware attacks), and liability for damages to third parties as a result of the breach.
It's important to note that cyber liability insurance does not only cover financial losses, but it also provides resources to help businesses respond effectively to an attack. This can include access to experts in data recovery and crisis management, as well as public relations services to mitigate reputational damage. Some policies may even offer training and resources to help prevent future cyber incidents.
What Can You Do?
Insurance is an important place to start. Be certain you have a rider that covers cyber property losses and cyber casualties included in your policy. It’s not a matter of if a data breach will occur..but when. Be prepared to minimize the damage when such an event occurs. Cyber liability can cover such things as:
- The cost of recovering, retrieving, or restoring stolen data.
- The cost of physical damage to your computers and servers caused by a cyberattack.
- The funds you lose in transfers to hackers (with some limitations on what you do to prevent losing them).
- Your lost income resulting from a cyberattack.
But that isn't all. What about the liability that a breach can have in exposing confidential information about your customers and employees?
It's important to understand that your liabilities to third parties whose information you fail to protect can be greater than the direct losses to your business. Cyber liability insurance covers the thousands or even potentially millions of dollars of claims against your business from your customers who suffer losses because you didn't secure their information.
All of this gets complicated as to what's covered by errors and omissions, what's general liability, what's employment practices liability, and what's covered by your contractors. You need an insurance expert to sort it all out and guide you in the right coverage for your business.
Prevention Before a Cyber Attack Occurs
Cyber insurance and cyber liability insurance only work for you if you are taking appropriate cybersecurity measures. It’s important to stay on top of security measures and regularly update them, because as technology advances, so do a hacker’s abilities.
Cybersecurity isn't just something that is nice to have. Cyber thieves and hackers do everything they can to stay constantly one step ahead of you. Cyber liability insurance is essential for businesses in this digital age. It not only provides financial protection, but also valuable resources to help minimize the impact of a cyber attack. So whether you're a small start-up or a large corporation, it's worth considering adding this coverage to your insurance portfolio. After all, being proactive in protecting your business from cyber threats is always a smart investment. So, do you need cyber insurance? The answer is a resounding yes. It's better to have it and not need it, than to need it and not have it. Protect your business and your peace of mind by ensuring you are covered with cyber liability insurance.
Contact Winter-Dent by clicking here or on the link below for a cybersecurity assessment today, and don't go another day without taking the steps you need to keep your business safe. Stay safe out there!
