Independent business consultant Larry Alton shares insight on cyber liability insurance in the guest blog post below.
In the Internet-dominated business arena, companies store more sensitive information than ever on their computers. But a shockingly low number of small businesses have invested in cyber liability insurance to combat the potentially devastating effects of a cyber-attack.
In fact, many small business owners are unaware of the high risk data breaches at their establishment, in the belief that hackers are likely to attack only high-profile, high-revenue firms. Although such breaches obviously occur, they do so significantly less frequently than among small businesses.
The “newsworthiness” of data breaches at larger corporations often overshadows the more frequent security violations that target small businesses.
Regardless of a company’s size or industry, business owners must take action to secure their customers’ valuable data against the possibility of a cyber-attack. In addition, investing in cyber liability insurance protects your assets should such an event occur.
The high costs of data breach recovery
When criminals get access to company databases, they become privy to a vast array of information, including customers’ Social Security numbers, credit card numbers, addresses and other identifying data.
They also gain access to sensitive business data, which they can use to open and access accounts, drain money and destroy the affected individuals’ credit. Recovering from a business data breach can cost companies thousands of dollars in fines and lost reputation.
Such expenses often include:
Business interruptions. Not only must hacked businesses often close their doors while they investigate the source and impact of data breaches, they also suffer from decreased sales due to negative publicity and diminished customer confidence. The days or weeks a firm spends out of commission represent lost profits and opportunities.
Security overhauls. Updating or implementing a new security system costs a great deal in software, infrastructure and personnel. It also requires training staff in new policies and procedures.
Concessions to customers. As a sign of goodwill, many businesses affected by data breaches offer free credit monitoring services to customers for a specified period of time after they occur. These and other perks – such as discounts or service promotions – help regain customer trust and loyalty. However, they do so at a cost.
Bankruptcies and business closures. It’s also the case that a number of small businesses have to shut down within a few months of a data breach. From stolen resources to the expense of responding to a cyber-attack, these incidents have the potential to deplete the savings of the most promising small business.
Though cyber-attacks can have these and other grim consequences for your company, cyber liability insurance provides valuable resources to help regain what your business may have lost.
Cyber insurance and how it can support your business
“For small businesses, nothing is more important than protecting their livelihood,” says BankingSense.com editor Natalie Cooper. “Cyber liability insurance is another tool they can use to prevent financial disaster in the event of a malicious attack.”
Like other types of coverage, cyber liability insurance covers policyholders in the event of a specified loss – in this case, a cyber-attack. As business owners work to recover information and resources from a data breach, the insurance covers expenses such as credit monitoring for affected customers, lost revenue, crisis and reputation management, customer notification and investigation of the attack.
As the popularity of cyber liability insurance increases, policies are available at prices any size of business can afford, from small startups to multinational corporations. Representing a small percentage of a company’s annual insurance costs, this product comes at a low premium in comparison to the potential repercussions of a data breach.
Including cyber insurance as part of an overall security strategy
Regardless of the size, age, industry or number of customers your company possesses, investing in cyber liability insurance may be crucial if you store sensitive data online. However, you should also recognize that insurance will not prevent a data breach from occurring.
To protect themselves most effectively from cyber-attacks and their devastating consequences, companies must incorporate cyber insurance into an overall security strategy that includes substantial security safeguards and a decisive incident response plan.
Although the rise of e-commerce and virtual data storage means limitless opportunities and convenience for businesses of all sizes, the threat of data breaches requires companies to use every tool at their disposal to protect their data and livelihood.
Because it covers expenses should the worst occur, cyber liability insurance is a necessity in any business security plan.
Does your company’s data breach response plan include cyber liability insurance? Leave a comment and share what steps you’re doing to protect your business?