Why your small business needs cyber security insurance

Why Your Small Business Needs Cyber Security Insurance

Posted by on Oct 22, 2021 in Insurance Advice

Many small businesses are unaware just how vulnerable they are to cyber-attacks. Companies that accept digital payments, store information on computers, or have personal information about their customers are all easy targets for cybercrimes. Even if you use services you think are protecting your information, cyber criminals are experts at getting through what might seem to be the hardiest security.

If you think you aren’t a target for cybercrimes because of your size, think again. Any information these criminals can access is considered fair game. Here, we explain why your small business needs cyber security insurance.

An Affordable Alternative to Expensive Protection

According to the National Cyber Security Alliance, 70% of all cyber-attacks target small businesses. Cyber criminals know that smaller companies often don’t have the budgets to prevent cyber-attacks. Strong infrastructures are costly, averaging just over $21,000 to install. However, if you can’t afford this, you need to protect yourself, which is where cyber security insurance comes in.

Funding Following a Cyber Breach

Cyber security insurance provides the money you need to recover from a cyber breach. All the information you store, whether it is personal, financial, or otherwise, can be of value to cyber thieves. Small businesses often store data on less secure systems including personal laptops. This makes your information more vulnerable. Once that information is accessed, you are responsible for the infringement on your customers’ privacy.

Such data breaches and the invasion of privacy lead to costly processes where you have to inform customers of the issue. You will also face the cost of credit monitoring, and even potential lawsuits filed by angry customers. Lost money from phishing attacks or ransomware demands can lead to bankruptcy, not to mention irreparable damage to your reputation. Insurance may help cover:

  • Customer notification costs
  • Legal fees
  • Credit monitoring
  • Fines
  • Cost of lost data due to lost or damaged laptops

The coverage offered varies and is based on the type of small business insurance policy you purchase.

What types of businesses need cyber security insurance?

If you own a small business that manages any of the following data, then you need cyber security insurance:

  • Medical
  • Financial
  • Confidential personal information
  • Social insurance numbers
  • Driver license numbers
  • Customer names, phone numbers, email addresses
  • Intellectual property for both you and your customers
  • Digital payment information

All of this information is highly confidential, and can lead to serious issues for both you and your customers should a data breach occur.

Costs of Cyber Security Breaches

You might not realize just how expensive cyber-attacks can be. They impact your business in many different ways, with costly consequences that can force you to shut down. Average costs vary from $21,000 due to lost business to upwards of $70,000 for loss of devices with sensitive data or misuse of IT resources by your employees. In fact, 60% of small businesses don’t survive cyber attacks and shut down within six months of the breach.

Weak Security

Hackers know that most small businesses keep their data on unsecure storage systems. This provides them with access to things ranging from arbitrary information to social insurance numbers for criminals to access to credit cards. Personal information can also be used to access people’s phone numbers and addresses for other types of fraudulent or even violent crimes. Between weak security and poorly trained personnel, small businesses are easily exposed to criminal activity.

Companies that don’t use third-party services to back up their data are more vulnerable to ransomware. Connections with other companies can also leave you open to risk. Although it is understandable that small businesses just don’t have the budget to invest in improved data security measures, the fact they are vulnerable is the main reason they should have cyber security insurance. It won’t prevent the attack, but it will help you survive the aftermath.

Remote Work Increases Risk

The pandemic has made working from home the new norm, especially for smaller businesses. This makes data even more vulnerable to cybercrimes. Personal device use, in hand with laptops, are the electronic equipment of choice along with cloud storage option for sharing data. All of these things greatly increase risks for data breaches. In fact, since the pandemic began, cybercrime is up 600%.

According to IBM, remote work has become a major security concern with their report showing 76% of respondents found remote work increased the time needed to identify and contain a data breach. As well, 70% said remote work would increase data breach costs to the tune of $137,000.

Pandemic-Related Cyber Crimes

Cyber criminals are taking full advantage of people’s fears during the pandemic. They are sending emails that ask recipients to click a link from (seemingly) the CDC or WHO to complete their crimes. These links in fact lead to virus-laden attachments or allow criminals to complete phishing attacks. In one case, the private information of 172 million social media users in China was posted for sale on illegal web markets.

Brick and Mortar Also at Risk

It is not just e-commerce companies that have to be worried. Brick and mortar companies are also at risk for cyber-attacks. Digitalization is also used in physical shops including access to the Internet, inventory information, shipment schedules, customer information, credit information, and more. If increased security isn’t an option, cyber security insurance is the only safety net your company might have. It is an affordable option that provides peace of mind while allowing your business to remain operational even if a cyber-attack occurs. It’s the responsible thing to do to protect your customers’ information and maintain your reputation as a trustworthy brand.

For more information on the small business insurance that Ottawa entrepreneurs need, speak to our team at Oegema, Nicholson & Associates Insurance Brokers today.

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