In today’s fast-paced world, small business owners need those proverbial eyes in the back of their heads. A few other pairs strategically positioned here and there wouldn’t hurt, either. You need to focus on sales, marketing, operations, and employee management. And then there’s information technology, which grows increasingly essential to your success.
The digital era opens your business to all sorts of evolving risks: ransomware, social engineering, and even cyber crimes from inside the organization. These types of cyberattacks have become common threats to the daily operations and long-term viability of burgeoning businesses. So, what can you do?
As a Property and Casualty agent with two decades of experience in business insurance, I’ve watched the computer age evolve. As such, I’ve had to map out strategies for businesses facing these challenges.
I tell my clients that cyber insurance is a great place to start. It helps protect your business against operational downtime and financial damage that could spell a lot of trouble for your venture in the short and long term. These policies, coupled with vigilant IT processes, reduce the odds of an attack and lessen the severity of one that might occur. Below, I offer insights into what cyber insurance is and why every small business with a digital presence should secure it.
Understanding Cyber Insurance
You have commercial property insurance that protects the physical assets you own. Similarly, you need cyber insurance that safeguards your data and other digital assets. Cyber insurance is a program aimed to safeguard your business from potentially crippling financial losses that might occur in the wake of incidents like data breaches, network outages, and third-party extortion. Extortion? Yes, this is certainly one of the perils you face.
I have a client with a heavy equipment business. They’re tied to a national manufacturer whose systems were breached, seized, and rendered useless by malicious actors. My client’s local platforms integrate with their complex dealer software. That caused some issues for a few harrowing days.
All computers and software were inaccessible. Unless the manufacturer caved to ransom demands, the operating system would be essentially kidnapped until those demands were met. My client’s sales and ops suffered for several days before normalcy was restored. Fortunately, their cyber policy helped cover the financial damage that resulted from this downtime and lost equipment, parts, and service sales. This is just one of several cyber insurance policy benefits.
Why Your Small Business Needs Cyber Insurance
Many small businesses face challenges when it comes to IT resources, often finding themselves at a disadvantage compared to larger corporations with expansive cybersecurity teams. The reality is, cybercriminals are constantly evolving their tactics, and it can feel like you’re always scrambling to catch up. That said, it’s crucial to prioritize the strongest defenses you can afford within your budget and staffing constraints. And while nothing can fully guarantee immunity from an attack, cyber insurance is a wise consideration.
The Dark Clouds in Cyberspace
Cyber attackers have grown smarter and bolder through the years. Unfortunately, small businesses are often seen as easier targets. I had a small electrical contractor as a client. Someone broke into their system through a sketchy email link, otherwise known as a phishing scam. A hacker took control of the device and wiped its hard drive — just for the fun of it.
A comprehensive cyber insurance plan can be a game-changer. It’s not just about coverage after an attack happens; it can also provide resources to help prevent attacks in the first place. Many insurance plans come with risk management tools, support for security improvements, and guidance to help you build a stronger defense. And, if something does happen, having that insurance in place will help you limit the impact, both financially and operationally.
Key Benefits of Cyber Insurance
Let’s break down a cyber insurance program piece by piece. In a nutshell, the advantages play out through protection, prevention, and continuation. Here’s a closer look:
Financial Protection
Cyberattacks typically come with a cost.1 Cyber insurance can help defray the expense of recovering computer access and systems. When dealing with sensitive data, the costs stemming from a breach can be even more profound. For instance, exposure of personal health information would likely require you to defend your business from a legal standpoint. And those expenses can snowball quickly.
Risk Management Expertise
In any facet of business, expert guidance is warmly welcomed. Cyber insurance carriers give you the opportunity to consult with their professional teams. These folks can identify exposures and risks that, due to newness and sophistication, might fly under your radar. This service falls under the shield of a cyber insurance policy, and your compliance helps fortify your company against digital crimes.
Business Continuity Coverage
When operations come to a halt, so does revenue. Yet you still have payroll to meet and vendors to pay in a timely fashion. Another benefit of cyber insurance is its promise to provide indemnification to cover these expenses. Financial support rolls in from insurance providers even as your business strives to resume normal operations. This assistance helps you work around and eventually through the difficulties.
The Various Coverages Offered Through Cyber Insurance
You can customize cyber insurance policies to meet your unique style of business. I take the time to understand as much as possible about a client’s organization before designing a cyber insurance program. Here are a few possibilities:
First-Party Coverage
These first party cyber insurance coverages apply directly to you and your business.
Data Breach Response is a policy provision that helps cover costs related to responding to a data breach. It includes things like notifying customers, paying for credit monitoring, and crafting messages for public relations purposes.
Business Interruption Coverage provides financial compensation for business income you may have foregone if a cyberattack affects your operations.
Cyber Crime Protection kicks in when your livelihood is held hostage, so to speak. Coverage extends to meet ransom demands by cybercriminals aiming to knock your organization offline.
Third-Party Coverage
These policy protections help compensate third parties affected by a cyberattack. They also pay attorneys defending legal action brought by others.
Legal Defense Expense: Attorney fees and court costs arise from lawsuits claiming your business failed to prevent a data breach. More often than not, the information involves sensitive customer information.
Settlements and Judgments: In some instances, courts will award compensatory damages to companies found even partially responsible for failing to secure or protect customer data. A cyber insurance policy offers protection against financial awards.
How to Choose the Appropriate Cyber Insurance Coverage
Selecting the right cyber insurance policy means understanding your defined risks and the exposures your business faces. When developing a cyber insurance strategy, take the following into account:
- Consider the characteristics of the data you manage, especially if it includes personal, financial, or health information.
- Ask yourself how much your organization depends on computer systems and digital assets.
- Gauge a potential cyber attack’s impact on your sales and operations and everyday viability.
Steps to Acquire Cyber Insurance
Now that you understand the importance of cyber insurance, here’s how you can take action:
- Assess your risk by looking for vulnerabilities in networks and your digital footprint.
- Compare policies from several insurers to find the best coverage options.
- Obtain clear knowledge about what a policy covers and what it does not by researching policy exclusions and dollar limits of coverage.
- Consult with an agent or broker specializing in the optimal cyber insurance strategies for your specific business.
Battening Down the Hatches
You conduct your business in an increasingly digital environment. Gone are the days of old-school paper transactions or sealing sales and deals with nothing but a handshake. Desktops, laptops, tablets, and smartphones all come into play and expand your digital area of operations. You can ramp up cybersecurity barriers, but sometimes, those with malicious intent find ways to pierce the armor. Cyber attacks befall even the biggest and most protected businesses, so smaller organizations certainly need to stay on guard.
A well-designed cyber insurance policy offers financial protection while also promoting ways to keep your business compliant and better positioned against attacks. Engaging with cyber insurance professionals to form a solid defense lessens the chance of severe damage from hackers or outages. Take the time to explore the benefits of cyber insurance today.
- https://www.ftc.gov/business-guidance/small-businesses/cybersecurity/cyber-insurance ↩︎