The saying “If you don’t protect the assets, you risk not accomplishing your mission” is the basic logic behind the concept of insurance. Insurance allows organizations to protect their assets against unwanted events. In like manner, cybersecurity insurance is designed to offer protection against unforeseen cyber-related issues.
Without cybersecurity insurance, organizations are left to single-handedly bear the consequences of cyber breaches— whether financial or otherwise. The 2011 PlayStation hack of Sony is a fitting example of one of the negative effects of a lack of cybersecurity insurance. The attack exposed the Personal Identifiable Information (PII) of millions of PlayStation users. And because Sony didn’t have a cybersecurity insurance policy, they were forced to bear the total costs of the $177 million that was incurred because of the cyber breach.
Sony’s experience provides the perfect microcosm of the financial implications of cyber-attacks which typically target small and medium businesses through malicious threats and ransomware. As revealed by the Verizon Data Breach Investigation Report (DBIR) in 2019, small and medium businesses were the recipients of 43 percent of cyber-attacks. That’s almost half of the total number of cyber breaches! Not forgetting the financial implications, it’s also been projected by Cybersecurity Ventures that by the end of 2021, $6 trillion will be lost to cybercrime alone.
For small and medium business owners, acquiring cybersecurity insurance is a no-brainer. It’s a must-have insurance policy needed to avoid reputation damage and to cover the financial cost of cyber breaches.
In this article, you will learn the basics of cybersecurity insurance and understand why every organization, especially small and medium businesses, must prioritize cybersecurity insurance policies in their business operations.
What’s Cybersecurity Insurance?
Small and medium businesses are often the target of cyber-attacks because of inadequate cyber protection. Nearly half of small and medium businesses lack a cybersecurity defense policy of any sort— a worrying revelation that explains the vulnerability of small and medium business owners.
As businesses continue to conduct transactions online, they need cyber insurance against potential cyber-attacks. Generally, cybersecurity insurance helps businesses to recover liabilities in cases of cyber breaches. Cybersecurity insurance, also called cyber insurance or cyber liability insurance, is a cybersecurity policy that’s designed to help businesses navigate the financial costs of conducting business online.
You might be wondering about the kinds of businesses that need cyber insurance. Well, every business that stores electronic data online needs cyber liability insurance. Electronic data may include Personal Identifiable Information, customer contacts and credit numbers, and customer sales. In general, cyber insurance is suitable for e-commerce businesses and any business that stores customer or client information.
What Does Cybersecurity Insurance Cover?
In today’s world, you can get insurance for pretty much everything. You may insure your health, life, home, and even the lives of your pets! These insurance policies cover different aspects of our lives. Similarly, cyber insurance covers online data in cyberspace.
Usually, cyber insurance policies insure first-party and third-party-related damages. First-party coverages help businesses to offset the financial consequences of cyber-attacks that affect their businesses. Typically, first-party coverages cover the following costs:
- Recovery activities: This covers the costs to replace or restore damaged data resulting from a denial-of-service (DoS) attack, a virus attack, or hacker attack, during a cyber breach.
- Credit monitoring: This covers the income costs and expenses that your business suffers during a cyber-attack.
- Executing PR and crisis management: This covers the costs of notifying clients as well as the costs incurred to manage the reputation of your organization.
On the other hand, third-party coverages provide legal protection should an insured company commit an error that exposes their customers to a cyber breach. Third-party coverages are specifically applicable to businesses involved in information technology and tech companies, and they help to mitigate inadvertent insider threats by employees which may put customers at risk.
Why You Need Cybersecurity Insurance
At this point, let’s face it, your cybersecurity defense systems don’t guarantee that you won’t be attacked by malicious actors. This is large because the responsibility of keeping watertight security isn’t solely dependent on your organization’s practices alone. You need a safety plan that’ll help you to offset the consequences of any error that may lead to a cybersecurity breach.
In case you’re still unsure about the need for cybersecurity insurance, below are 5 reasons that are sure to convince you why you need a cyber insurance policy:
1. Protects Your Business
Cybersecurity insurance protects your business against the legal or financial implications that you may incur because of cyber breaches. For example, as part of the first-party coverages, your business will be reimbursed for money spent on notifying your customers during cyber breaches.
2. The Unpredictability of Cloud Computing
Cloud computing is generally used to conduct business transactions. Loads of information are stored in the cloud for various purposes. The safety and efficiency of cloud computing aren’t always the responsibility of business owners. However, a cybersecurity insurance policy offers your business the safety net it needs in case your cloud providers are inconsistent with their service or network. Cyber insurance secures your business against the unpredictability that may arise from storing data in the cloud.
3. Data Loss
One of the severe consequences of a security breach is data loss. Data loss affects the reputation of your business and usually leads to huge negative financial and legal consequences. This is why you need a cyber insurance policy— to ensure swift data recovery.
4. Traditional Insurance Doesn’t Cover Cyberspace
“But if I have liability insurance, I’m covered.” No, you’re not entirely covered. Standard business and property insurance exclude data protection about social security numbers, credit card numbers, or other personally identifiable. This is one more reason why your business needs cyber insurance— it ensures that your business is financially & legally covered in the event of a system error or network anomaly that affects your business operations.
5. Your Business Reputation is on the Line
Another severe consequence of cyber breaches is the reputation damage it costs small and medium businesses. Such is the overwhelming effect of cyber breaches on small businesses that 60 percent close off after exposure to a cyber-attack. Having a cyber insurance liability policy helps your business to cover any defamation or privacy issues, whether legal or financial, that may arise from any security breach.
The growing use of the internet for business transactions makes business owners vulnerable to cyber crimes. For small and medium businesses, the financial consequences and subsequent adverse reputation impact are particularly far-reaching and damaging to their working operations.
At NWTechnologies, we’re focused on ensuring that small and medium businesses have the required access to cybersecurity insurance policies that’ll ensure adequate protection against security breaches. Our consultation services and cybersecurity insurance policies are designed to help you navigate the negative consequences of cyber breaches should they occur. Contact us today to book a session with any of our experts.