Considering the high stakes of operating a business without cyber security liability protection, the majority of America’s small businesses put themselves at risk of experiencing devastating losses by failing to add this coverage to the company’s business insurance portfolio.
Ninety-five percent of America’s small businesses operate with no cyber security insurance in place, according to the 2015 Small Business & Cyber Security survey conducted by Endurance International Group. Despite the fact that the majority of small business owners consider cyber security a serious concern, there appears to be little impetus among small businesses to insure themselves against potential losses.
Cyber attackers do not target big businesses alone, and in today’s relentless hacking environment the question is not “if” a small business will fall prey to the devastating effects of a cyber attack, but rather “when.” At a time when the Internet dominates the world’s business arena, companies large and small store more sensitive data on computers and in the cloud than ever before.
With so much at risk, insurers say that nothing is more critical to protecting a small business’s ability to operate and remain solvent than cyber liability insurance.
There’s more at stake than just the company’s data files too. When criminals gain access to a business’s databases, they gain access to that company’s customer information including Social Security numbers, credit card information, contact information and other identifying data that places them in harm’s way. Criminals can gain access to sensitive information that can be used to open and access credit accounts, drain cash from bank accounts and destroy a person’s credit.
Trying to recover from such a breach can cost a small business owner millions of dollars in legal costs and restitution, and destroy the company’s reputation in the process. Insurance professionals and risk managers all agreethat the most valuable endorsement a small business owner can add to their existing business policy is cyber liability insurance.
“It’s the most important insurance they don’t have,” They say.
Cyber liability insurance coverage (CLIC) has been available for more than 12 years, but still most small business owners seem to know little to nothing of its existence.
In the U.S., 46 states have mandatory requirements for data breach notification. These notification regulations act in part as a driver for CLIC, since the costs involved with of notifying affected customers and other users can be very high.
As the costs of dealing with a data breach continue to rise, and when the expense of dealing with mandatory notification is added, the option to purchase cyber liability insurance will become routine part of a business’s risk management portfolio that already includes property, general liability, and business income coverage.
Cyber liability insurance provides coverage in the aftermath of theft or loss of both first-party and third party data. Regardless of whether the data breach happens directly to the insured company or to a company whose data the insured company is working with, the damage is covered.
The average cost of a data breach to the affected business is $3.8 million, according to the Institute for privacy, data protection and information security policy, representing a 23 percent increase since 2013. When working with client data, businesses assume responsibility for the security and privacy of client data maintained on its servers. The business’s general liability policy does not cover cyber breaches.
Data breaches and network security failures are common occurrences in companies worldwide. A recent IBM Cost of Data Breach Study reports that more than 91 million security events occur each year and no business, small or large, is immune. Small business owners should speak to their business insurance provider about adding cyber security liability to the company’s business insurance portfolio before a data breach happens.
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