Simply put, cyber insurance is a rapidly growing industry because cyber attacks are on the rise. Businesses want to protect themselves by managing the risks and resultant costs. Soon, cyber insurance is something that all businesses, big and small, will want in addition to the standard fire, flood, and theft protection. If you’re still not sure if you need cyber insurance, take a look at these six reasons why it is becoming more popular and why it is essential for your business.
IT Departments Can’t Protect You from All Cyber Attacks
Often, businesses think they’re 100-percent secure and a data breach could never happen to them because they have a strong IT department. As a result, they don’t feel the need to buy cyber insurance. However, history is showing that even large businesses that have risk mitigation funds are being targeted by cyber attacks. For instance, in February 2014, St. Joseph Health System suffered a cyber attack, compromising the health records of more than 405,000 patients. It took two days for IT employees to recognize the data breach before they were able to take the server offline.
You’re wrong if you think your business doesn’t have to worry about cyber attacks. It’s impossible to be 100 percent secure. And the bigger your business, the bigger the risk. You need cyber insurance to protect your business financially.
Cyber Attacks Are Not Covered By General Insurance Policies
In the past, many businesses mistakenly thought that they were already covered in the event of a cyber attack because of their general insurance policy. However, this was not typically true. You can find some general liability policies that protect you from cyber attacks, but they don’t typically have the range of coverage you get from stand-alone cyber insurance.
Property, casualty, and professional liability policies are carefully worded to make it clear that data security breaches and other cyber attacks are not covered. For instance, general liability policies typically list that only injury to “tangible” property is covered. The main reason for this is that it’s hard to put a price on something that you can’t hold in your hands, such as millions of customer records that are only stored virtually.
Businesses Must Shut Down Operations Until Attacks Are Resolved
When businesses experience a cyber attack, they must close down their website and business until it is safe for customers and employees to use. Businesses can’t make money unless they are open, which means cyber attacks are a nightmare, especially if the business doesn’t have cyber insurance to cover the lost revenue. Many employees work remotely or on business servers and can’t do their work if operations are shut down. Customers also can’t buy products and services.
Cyber insurance helps businesses manage the effects of a cyber attack quickly, so they can open up and start making money again. For instance, if a business finds out that a cyber attack has been targeted at their credit card payment system, it isn’t ethical to keep the business open because it puts customer information at risk. They must shut down until the cyber attack is resolved. Target faced a similar cyber attack in early 2014. As a result, Target offered its customers one free year of daily credit monitoring after their franchise was targeted by hackers who stole customer credit card information.
It’s Expensive to Deal with the Aftermath of a Cyber Attack
Not only do businesses suffer from a loss of sales and employee hours, they also have to pay for any damage that customers endured as a result of the cyber attack. Your business is liable if you lose third-party data. Plus, businesses can’t legally hide information about cyber attacks from the public. This means that businesses must inform all affected customers of a cyber attack. Businesses should apologize to their customers and employees, too.
The following are some costs associated with dealing with a cyber attack:
- Customer Notifications: Your business is legally and ethically obligated to alert the public and your customers when you have experienced a cyber attack. Depending on the size of your business, this can easily cost upwards of $100,000.
- Business Interruption: If you have to shut down your business for any amount of time, you lose out on revenue.
- Credit Protection: If a cyber attack puts your customers’ personal information at risk, you are liable and must pay for credit monitoring services.
- Investigations: If It’s not immediately clear how the cyber attack affects your business and customers, you must pay specialists to investigate.
- Cyber Extortion: If a hacker holds your business information hostage, you may have to pay to get it back.
- Crisis Management: Business trust is lost after a cyber attack. There are PR costs associated with managing your business reputation.
Businesses Must Earn Back Customer Trust After a Cyber Attack
Customers don’t like to be informed that their identity or credit card information is at risk because of a cyber attack on your business. However, they hate it even more when you’re not prepared to deal with the effects. P.F. Chang’s China Bistro recently investigated a possible data breach after customers’ credit cards started showing up on carding sites. Customers appreciated their fast reaction.
Businesses are buying cyber insurance because customers want them to have it. Cyber attacks hurt a business’s reputation, and cyber insurance helps save it. Identity protection is important to customers, so it should be important to your businesses, too. People are particularly concerned with their credit card and bank account information. With that in mind, if your business suffers a cyber attack, you can earn back your customers’ trust by being prepared.
Buying Cyber Insurance Is Becoming Increasingly Easy
Cyber insurance has been around for more than a decade. However, businesses were often reluctant to buy it because the application process was too complicated. The process was full of jargon, and it was difficult to determine what was covered and what was not. Now, cyber insurance is much more straightforward and the application process is as streamlined as other insurance policy applications. Underwriters can even give you a quote estimate before you apply with only a general understanding of your website’s value and revenue in mind.
Cyber insurance is important for both big and small businesses. The list of big companies that have been affected is growing year after year, and it includes big names like Neiman Marcus, Home Depot, Michaels, and others. In addition to taking the necessary security measures to protect your business, it may be a smart idea to get cyber insurance to help you pay for the consequences in case your business get attacked.