by Chris Cox, AVP, Regional Sales, Main Street America Insurance •
When someone mentions a data breach, what kind of company do you think of? Likely, large retailers, banks or other companies dealing with the data of thousands or millions of customers are the first that come to mind. The reality is that nearly half of small businesses also experience cyberattacks.
According to Astra Security, a study revealed that nearly 43% of cyber attacks are on small businesses, yet just 17% of small businesses have cyber insurance.
Cyber insurance coverage is one of the best ways to protect yourself, your business and your customers. With the right cyber insurance policy in place, you can recover faster and protect your business from significant losses.
Common Cyber Security Risks
First, let’s talk about some common cybersecurity risks your business may face. Most often, these threats include:
Malware –malicious software designed to invade your network and steal data, including ransomware, trojans, spyware and more.
Phishing – when a cyber criminal reaches out by phone or email in an attempt to get victims to share personal information, usernames or passwords.
Spoofing – a technique where criminals spoof your business domain or email addresses to fool customers into giving them personal data.
Supply Chain Attacks – when criminals target third-party vendors your business works with through either software or hardware supply chain attacks.
Preventing Cyber Attacks
There are steps you can take to get proactive and try to prevent cybersecurity threats on your business, including:
Have a Plan
Don’t wait for a breach to happen to prepare your business for a cyber event. Instead, come up with a plan for how your staff will actively work to prevent breaches, how you’ll respond internally in the event of a cyber attack and how you’ll work with your customers to recover.
Enhance Your Security
Restrict access to sensitive data to only those who need it. Secure your systems with unique credentials for each employee and change passwords often. Conduct regular training with your staff on cyber security and risk prevention.
Review and Improve
Regularly review your security protocols and make changes when necessary to protect your staff and business. And don’t forget to keep software up to date with the latest updates and patches to avoid leaving your systems vulnerable to attack.
Review Your Insurance Policy
Your team should regularly review all commercial insurance policies to ensure you have the coverage you need and that premiums are up to date. While this won’t technically prevent a loss, it will help you avoid headaches in the event of a data breach.
Like many other things, understanding cybersecurity threats is key to protecting your business. Now, let’s talk insurance.
What is First-Party Cyber Insurance?
Simply put, first-party cyber insurance directly protects your business. With first-party cyber coverage, your business is protected from damages caused by a cyberattack that occurs on your network or systems.
As hard as we try, there is no way to 100% prevent a data breach, so you need to be prepared. Because first-party cyber coverage directly protects your business, it is a vital insurance policy for any small business to have.
In most cases, coverage includes:
• Rebuilding your network or replacing technology after an attack
• Restoring any data destroyed after malicious or accidental breaches
• Recovering data loss after a natural disaster or other accident
• Legal and public relations help to restore your business’ reputation
• Reimbursement of income lost while your systems are down
• Reimbursement of ransom payments made to cyber criminals
First-party cyber insurance can protect you from most of the cybersecurity threats your business will face and can help you get back up and running with minimum loss.
What is Third-Party Cyber Insurance?
The term third-party refers to the clients, partners, and vendors your business works with every day. Knowing this, the biggest difference with third-party cyber insurance coverage is that it’s designed to protect your business from actions taken by third parties after a breach.
Essentially, this coverage protects you by:
- Paying legal fees, court costs and damages if a third party sues your business
- Offering legal and public relations help to restore your business’ reputation
- Paying judgments if your business is found liable for a data breach
- Helping your business navigate and pay settlements outside of court
Data from Security Ventures show 60% of small companies go out of business within six months of a cyberattack. While this coverage won’t help you recover lost data or get your business up and running, it can save you from spending hundreds of thousands of dollars in unexpected legal fees after an incident.
What Isn’t Covered by Cyber Insurance?
As with any other insurance, first-party and third-party policies have exceptions and exclusions. No cyber insurance policy will protect you or your business from:
- Intentional acts, like fraud or criminal conduct
- Prior acts, meaning claims you knew about before your coverage began
- Legal fees resulting from a criminal trial or grand jury proceedings
- Business interruption if your systems are under the control of a third party
Choosing the Right Coverage
Now that you know what both first-party and third-party cyber insurance are, how do you know which coverages you need?
First, you need to evaluate your business risks. Take a close look at all your company’s vulnerabilities and data collection habits, so you know what type of coverage you’ll need. Start by reviewing the following:
- The type of data you collect and store, including all sales, personal, and banking information
- How susceptible your business and network are to threats. Are there gaps in your security?
- What local, state, and federal regulations your business needs to comply with
- What steps both you and any third parties you work with are taking to prevent a breach
- How many breaches or near-breaches your business and any third parties have experienced before
From there, an independent insurance agent can help you look over your current policy, evaluate your risk and determine which coverages (and what level of coverage) your business needs to be fully protected.
To learn more about cyber insurance and get coverage, find an independent agent today.