Cyber Insurance: The Ultimate Solution to Your Cybersecurity Woes
As the world becomes increasingly digitized and connected, cyber threats will continue to grow in number and severity. In fact, according to some experts, businesses will lose more than £50 billion annually by 2023 due to cyber attacks.
Whilst no business is immune to being hacked, small to medium sized businesses are particularly affected because they often have limited resources and smaller security teams than larger corporations. Small businesses also have less cash reserves to cover potential losses from a cyber attack. So, to help protect your business against the risks of cyber attacks without breaking the bank, consider getting cyber insurance as part of your risk management plan.
Read on to learn more about what cyber insurance is, why you need it as an SMB owner, and how it differs from other types of insurance like general liability or property insurance.
What is Cyber Insurance?
Cyber insurance is a type of commercial insurance designed to cover a business’s losses due to cyberattacks, data breaches, and other computer-related risks. It generally does not cover software or hardware failures, theft, or employee negligence.
Cyber insurance also varies by provider, so make sure to choose a policy that best meets your needs. Some companies may offer “all-risk” policies, which means they’ll cover any type of loss or damage that occurs due to a cyber breach. Other policies are “named perils” policies, which means they only cover losses due to specified events.
Typically, cyber insurance policies are named perils policies.
Why Should Small Businesses Have Cyber Insurance?
According to figures released in 2022, 68% of small UK businesses said they didn’t have any cyber insurance cover at all. However, a single data breach can destroy a company overnight so whilst it may seem like an unnecessary expense for your small business, it’s actually essential to your financial security.
Cyber attacks can cause massive disruptions to your operation, including loss of critical data, identity fraud for customers and employees, and a temporary or permanent shutdown of your business. When a cyber attack occurs, you may need to pay for expenses like hiring a forensic team to investigate the breach, hiring third-party contractors to repair the damage, or paying for the cost of credit monitoring services for your customers, whose data may have been stolen. Cyber insurance can help cover these unexpected costs, which may be so high as to put the very survival of your business into doubt.
What would I need to know about a cyber insurance policy??
As with other types of business insurance, each cyber policy has different terms and exclusions that are important to understand before purchasing a policy. Some of the most important terms to understand include:
- Excess: The amount of money you’ll need to pay out of pocket before your insurance policy starts covering you.
- Policy Limit: The maximum amount your policy will pay out per claim.
- Policy Period: The length of time your policy is in effect.
- Exactly what risks are - and just as importantly what aren't - covered.
What kinds of cyber cover should I buy?
There are several different types of cover available for cyber insurance. Below are a few of the most common types of cover available, as well as examples of how they would apply to small businesses:
- Computer Fraud cover - If your company suffers losses from fraud committed over the Internet, this might help you recover the money that was swindled from you. For example, if you're in the e-commerce business and a fraudster pretending to be a regular customer orders some merchandise from you, then diverts it to another address so you never get paid for it, the computer fraud cover might reimburse you for the loss.
- Cyber Liability Cove
- If a customer, client, or another person suffers injury or damages due to your breach of data privacy or security, this cover may help you cover those costs. For example, if an employee accidentally sends a sensitive customer database to a competitor, this cover could help you pay for the costs of restoring the customer's trust.
- Data Breach cover - If your company suffers a breach of data privacy that leads to the loss of customer data (whether internal or external), this cover could help cover the costs of responding to the breach and restoring customer trust. For example, if a computer virus infects your company's computer network and leads to a data breach, the data breach cover would help you with the costs of alerting customers, hiring a forensics team, and hiring a public relations firm to respond to the breach.
- Extortion cover - If someone attempts to extort money from your company by threatening to release sensitive data, this cover could reimburse you for any costs you incur. For example, if a hacker discovers a company database that includes information, like social security numbers, and threatens to release the data if the company doesn't pay a ransom, this cover could help reimburse the company if it decided to pay the ransom.
This type of cover can be difficult to find of course. There is never any guarantee that the criminals would keep to their word - and every ransom payment made creates an incentive for more such attacks.
Is Cyber Insurance Expensive?
It can be especially expensive if you wait until a cyber attack happens before you buy a policy!
However: every business is different so the only way to get an accurate costing is to get a quote from a cyber security insurance specialist. You may also want to check with your current business insurance provider to see if they offer cyber insurance as an add-on cover.
Keep in mind that cyber insurance policies are relatively new, so it’s important to shop around and compare policies from multiple providers. You may also want to consider hiring a professional to help you understand the different policies and find the best one for your business.
How can I protect my business against cyber attacks?
Although you can't eliminate the risk of cyber attacks entirely, you can take steps to reduce it. Below are some tips on how to protect your business from cyber attacks.
- Find a Trusted Insurer: Before you buy cyber insurance, make sure that your potential insurance partner is reputable, trustworthy, and has the experience needed to provide the appropriate cover for your business.
- Educate Your Employees: You can also implement internal security procedures to protect yourself against cyber attacks. For example, you can create a training program for your employees that instructs them on the dangers of clicking on suspicious links, sharing sensitive data online, and downloading malicious content.
- Update Old Software: Another way to reduce your risk of being hacked is to update the software on your computers and devices. Make sure that you download the latest operating system updates regularly and have antivirus software installed on your devices.
- Create a Crisis Management Plan: this will help you respond to cyber attacks and other crises as they happen. This includes having a plan for what to do if you discover that your company has been hacked.
- Make sure you have a remote backup system so that you can can get back up and running quickly if your computer system is corrupted in some way.
As the world becomes increasingly more digitized, cyber threats will continue to grow in number and severity, and they are already one of the biggest threats facing businesses today.
Thankfully, there is a way to protect your company against these threats: cyber insurance. Cyber insurance can help you recover from data breaches, extortion attempts, and other cyber-related losses.
However, remember that no business is immune to being hacked. By dealing with an experienced insurer, educating your employees, and keeping your business's software up to date, you can reduce your risk of being hacked and, if a cyber attack does occur, be prepared to respond.