At the end of the day, we trust that the internet is safe. Now, many people will protest to this statement. But the mere fact that you send emails, make online purchases, or have a social media account shows your sense of security. However, this security is bred out of necessity. No matter the job you have, using electronic communication is a necessity. It is only when you come to terms with how vulnerable your information truly is, that you will see value in cyber insurance.
Understand the Vulnerability
The 2017 State of Cybersecurity in Small & Medium-Sized Businesses report states that 61% of small businesses have experienced a cyber attack in 2017. This is a 6% rise from 2015. Recovering from a breach monopolizes a small businesses resources and many companies do not have a recovery plan set in place. Of course, keep in mind that the company as an entity is not the only victim. Customers and employees are likely to suffer the consequences. Most companies hold sensitive information – passwords, credit card information, addresses, and other data. When assessing a cyber insurance cost benefit analysis, companies need to factor in business lost by angry customers. Additionally, potential lawsuits and GDPR regulations will increase the risk. Any third party company associated could also suffer data loss.
Making the Jump into Cyber Insurance
Cyber insurance is a $3.2 billion industry. As breaches become more prominent, the cyber insurance landscape is projected to grow. In fact, P&S Market Research states that it will grow up to $17 billion by 2023. More and more people are realizing that their insurance policies do not cover cybersecurity, as cyber is an independent type of insurance. There are two types of insurance: first and third party insurance. First party insurance covers the business. In contrast, investing in third party cyber insurance covers both your business as well as all impacted by the fallout of a breach. This even includes customers. There are many sub-policies, each of which cover different scenarios and risks.
Making the Right Coverage Choice for your Business:
There are many customization options for cyber insurance. A good insurance plan will cover your business within your financial boundaries. Additionally, a good plan will revolve around supporting your businesses biggest perceived risk factors. Here are some coverage options:
- Security Breach Notification and Remediation Expense Coverage: This covers business fees from a data breach. Think of it as basic umbrella coverage for your company.
- Failure of Notification Coverage: This helps cover your company is for some reason you do not report a recent data breach, or fail to notify people of the breach.
- Cyber Extortion : In the case of ransomware, this covers reparations.
- Negligent Computer Virus Coverage: This covers viruses that occur within the work place. This includes computer damage, data protection, and financial damage.
- Public Relations Efforts: Some companies will work to rehabilitate your image, as well as fund fights against defamation.
- Business Interruption: This covers loss of income due to the time lost in dealing with a data breach fall-out.
- Restoration: This covers costs to replace computer software and hardware that is altered, damaged, or destroyed. Additionally, it covers data replication and restoration
Cyber insurance is a relatively new industry, and as a result, many policies will struggle with protecting against cyber threats that are not easy to quantify. For example, despite public relations efforts, a damaged reputation and lower sales following a breach are often hard to protect against. Additionally, many insurance policies do not cover heft of intellectual property.
Cyber insurance may seem like yet another way to wring money out of a small business, but that mentality goes directly against a small business’ favor. Incident response planning is one of the most effective frameworks to manage risks. Preparation is essential for any company that hopes to have a quick and clean recovery from a cyber attack. It is important to remember that the likelihood of being target by a hacker or bad actor is high. The notion that only big companies like Target or Equifax get attacked only serves to catch you off guard. Cyber Insurance is one of the most concrete methods to implement a formal system that will help you mitigate the risk.