Is Cyber Insurance Necessary for Your Business?

Is Cyber Insurance Necessary for Your Business?
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Are you a business owner? You’ve probably heard about cyber insurance. If you haven’t gotten it yet, you’re leaving yourself vulnerable to potential cyber threats. This is why savvy companies in the realm of cybersecurity recognize that cyber incidents are inevitable, prompting them to invest in cyber insurance.

 

Today, many companies opt for general liability insurance to shield themselves from potential legal actions stemming from accidents, negligence, or injuries. They also invest in professional liability insurance to safeguard against the costs of errors, misconduct, or negligence in services provided to clients. Similarly, numerous companies are mandated by states to secure workers’ compensation insurance to ensure coverage for injured employees’ medical expenses and loss of income.

 

However, why do many companies overlook cyber insurance to protect themselves against first- and third-party claims arising from cyber incidents? According to the Under Attack and Unprepared: Argo Group Cyber Insurance Survey 2017, which surveyed 200 organizations in the U.S. and U.K., it was found that 57 per cent of SMEs lack cyber insurance, with only 27 per cent expressing willingness to purchase a policy.

 

In today’s hyper-connected digital landscape, where a weak password, stolen credentials, or a carefully crafted phishing email can lead to a significant data breach, does it make sense for businesses to neglect cyber insurance? Cybersecurity risks are on par with or even exceed other formidable business risks such as natural disasters, fires, and business interruptions.

 

If you’re considering obtaining cyber insurance for your business, this article will delve into five compelling reasons why cyber insurance is unequivocally a sound business investment for your company.

 

Secure Handling of Customer Data Online

 

Whether you utilize an in-house server or opt for cloud storage, chances are you’re housing digital files containing sensitive customer information. This data serves as a veritable goldmine for hackers and identity thieves, who can exploit identities and financial details to perpetrate fraudulent activities and even extort your business for ransom payments.

 

The Cost of Data Breaches

 

Data security experts emphasize that data breaches are not a matter of if, but when. Regardless of the scale of your operations—whether you run a small, one-person enterprise or a large organization—cybercriminals target businesses of all sizes. According to the Ponemon Institute’s 2017 Cost of Data Breach Study, the average total cost of a data breach in 2016 was $4 million.

 

Small businesses are often prime targets for hackers and identity thieves due to two main reasons. Firstly, small businesses tend to underestimate their vulnerability to cyber threats and may overlook essential security measures. Cybercriminals exploit this perception of insignificance to their advantage. Therefore, if you’re a small business owner, it’s wise to seek guidance from an insurance broker regarding the viability of obtaining cyber insurance.

 

Business Insurance Coverage Won’t Always Protect You

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Many business owners assume that their existing business insurance policies provide sufficient coverage, rendering additional cyber insurance unnecessary. However, it’s crucial to recognize that general liability policies often contain exclusions for cyber attacks.

 

Your standard business liability insurance is unlikely to cover data loss resulting from actions like malicious employee behaviour or cyber-attacks. While most policies offer coverage for system outages and data loss caused by natural disasters, they typically exclude losses incurred due to hacking or employee sabotage. Additionally, general liability policies commonly disregard losses stemming from online activities. This is where a comprehensive cyber liability policy becomes invaluable, filling in the gaps left by traditional coverage.

 

Effective Risk Management

 

While large corporations often have dedicated risk management departments, small businesses may lack the resources for such oversight. Nevertheless, a robust cyber insurance policy can serve as an effective risk management tool. Cyber insurance providers can fulfil roles akin to a dedicated risk management team, offering various services to mitigate cyber risks.

 

For instance, insurers may collaborate with small businesses to ensure the implementation of crucial cybersecurity measures, such as firewalls, and establish social media policies to reduce risks. Insurers are motivated to assist in these areas because enhanced protection decreases the likelihood of breaches and subsequent claims. While the Internet facilitates business operations, it also exposes organizations and customers to cyber threats.

 

Determining the Right Cyber Insurance Coverage for Your Business

 

Cyber insurance isn’t a one-size-fits-all solution. The coverage you need depends on various factors specific to your business. For example, if your company deals with content distribution, you might require media liability insurance to address potential copyright infringement claims.

 

Similarly, businesses operating in the healthcare sector often need robust privacy insurance coverage due to the sensitive nature of the patient data they handle. On the other hand, technology firms may require cyber coverage that protects against data loss resulting from third-party cloud, software, or IT service providers.

 

Understanding the unique risks and vulnerabilities of your business is essential in selecting the appropriate cyber insurance coverage. By evaluating your industry, operations, and potential exposures, you can tailor your policy to provide comprehensive protection against cyber threats.

 

Dulquer X Margin

Dulquer X Margin is a passionate writer contributing insightful content on the Mirror Eternally website. His current focus explores the captivating world of interesting articles, ensuring every event leaves a lasting impression.