Small businesses face an increasingly and disproportionately challenging cybersecurity environment. Between changes in the nature of work driven by the COVID-19 pandemic, and threat actors professionalizing their operations, cyber risk is rapidly increasing especially for the small business. Although cyber attacks can happen to anyone, small businesses are becoming easier targets for threat actors due to the vulnerabilities they unknowingly leave exposed. Cyber insurance helps SMBs prepare for worst case scenarios by helping them proactively identify, manage and mitigate risks.
Who needs cyber insurance?
Every small business can benefit from having cyber insurance as part of a cybersecurity plan. SMBs may believe they are less likely to be targeted due to their size; however, security through obscurity no longer holds true.
Cyber criminals target SMBs knowing these companies are less likely than larger businesses to have rigorous cybersecurity plans in place, or an adequate security budget to stay ahead of the quickly changing threat landscape. Cyber insurance can help SMBs prepare for potential cyber attacks by identifying what their risks are, offset any potential damages as part of a holistic risk management approach.
Why does my business need cyber insurance?
From defraying costs following a potential incident to indemnification for legal fees, small business cyber insurance helps ensure protection against events like data breaches of client information and ransomware attacks.
Here are six (6) benefits of cyber insurance for small businesses:
It compensates losses that resulted from business downtime Destructive cyber attacks, such as ransomware, can lead to unexpected downtime. Depending on the severity of the attack, everything from individual user computers to servers can be rendered unusable; even after recovery business interruptions may continue if data has become corrupted or only partially restored.
Cyber insurance may help cover the costs of any revenue lost during downtime caused by a cyber attack, as well as associated expenses.
It can help cover the cost of regulatory fines Following a data breach, your business may face additional losses due to regulatory fines and regulatory defense costs, especially if your business holds sensitive client data. Specific cyber insurance for small business policies may help cover such costs. Additionally, policies may help cover legal defense costs necessary for any legal challenges beyond regulatory fines.
It’s necessary for regulatory compliance, including customer notification requirements State and provincial regulations may require your business to notify clients in the event of a data breach containing PII. Small business cyber insurance can help you comply with such regulations and cover the cost of customer notifications. Policies may also help cover the cost of operations like providing credit monitoring to impacted clients for a specified period of time.
It can help recoup costs associated with recovering compromised data Your business may lose access to data following a variety of cyber attacks, including a malware incident or ransomware attack. Data mining and recovery can be expensive and require specialized technical knowledge. Small business cyber insurance policies can help cover these costs.
It can cover the costs of replacing damaged equipment Cyber attacks can degrade your organization’s equipment, leading to unforeseen additional costs in repairing or replacing damaged hardware . For instance, compromised software may lead to a server crashing and needing to be replaced due to the extra computational strain. In such cases, cyber insurance policies can help cover this cost. Additionally, you may find your systems have been compromised with highly persistent or stealthy malware. In such cases, it may be cheaper to replace any potentially compromised hardware. Again, small business cyber insurance can help these costs.
It can cover ransom compensation In the event of a successful ransomware attack, your business may have to choose between paying the ransom and potentially losing all of its data. While data recovery from backups is always preferred, if they’re unusable, payment may be the only option for a businesses’ recovery. In these circumstances, having broad language to pay expenses on behalf of the insured can be immensely beneficial to cover cyber recovery costs.
What kind of cyber coverage does my small business need?
Cyber insurance coverage can be customized to a business depending on its risk profile. That said, the fundamentals of cyber insurance, such as first-party coverage, are standard for all plans. The following factors may play a role in determining how a business’s cyber insurance policy is customized.
Potential exposure risk One of the initial factors to consider is determining the overall potential exposure risk. To effectively evaluate potential exposure, you should first review your cyber risk assessment. This may identify various exposure factors, such as your business’ online presence, the various types of hardware and software you may use and their associated vulnerabilities, and the wider hacker threat environment. As such, network security is typically assessed during a cyber risk assessment. Depending on the types of security measures you have in place, your policy and premiums may change. The areas of potential risk will be the primary factor to determine the exposures your business may need to remediate, as well as the appropriate coverage limits to protect against them.
Types of stored data Your business may qualify for different policies depending upon the types of data it collects and stores. These policies may support different types of services, such as providing for client credit monitoring or identity protection services. Of course, if your business does not handle client PII at all, then your policy may be tailored more towards covering the costs of damage to your business following a potential attack. Your business may have different cyber exposures and concerns depending on the nature of their operations. For example, in the event of a cyber attack a manufacturer’s primary concern would be continuing their business operations, meanwhile a legal office may be more concerned with the PII exposure and the obligations that come with that. Certain sections of a cyber policy will be more valuable depending on the business and will need to be highlighted.
Sensitive data access our small business cyber insurance policy premium may also be influenced depending upon the number of people in your business who have access to sensitive data. The types of access controls your business has in place can also affect the policy. Similarly, staff location and work environments will also factor into your policy. For instance, if your business has a distributed workforce, large numbers of whom have access to sensitive data, your policy may be different than if you have a single office where only select in-office employees can access sensitive data.
Revenue Your business’ total annual revenue can determine the premium for your coverage. Additionally, the total revenue will help establish the scale of potential impact to your business. You can expect to pay a higher premium as your annual revenue increases. However, your policy may also include additional coverage to appropriately cover the wider range of threats your business may face.
Industry Different industries face vastly different threat environments and compliance requirements. For instance, healthcare companies are targeted more frequently than those in other industries. Their cyber insurance policies will thus be put together according to their exposure.
Mitigate your clients' cyber risk with Coalition
Small business cyber insurance is one part of a more holistic approach to risk management. While a comprehensive cybersecurity plan aims to minimize risk as much as possible, it’s impossible to bring risk down to zero. This can be especially true for SMBs, which may lack the resources necessary to fully invest in cybersecurity defenses. This is where Coalition’s small business cyber insurance can step in.