Seems like cyber breaches are reported in the news almost daily. Most small to medium sized businesses believe they aren’t a target for those nefarious cybercriminals. Time to think again. Small and medium businesses (SMBs) create 64% of the new jobs in the U.S., account for 54% of all U.S. sales, and about half of all private-sector payrolls. SMBs aren’t just targets — they’re cybercriminals’ top targets. According to the Verizon 2013 Data Breach Investigations Report, small and midsize businesses suffered data breaches more often than larger firms. To download the report, click here.
The even bigger news is that your current insurance is not likely to cover you for cyber breaches. General and umbrella liability are there to protect you only against claims of property damage and bodily injury.
How do you know if you need cyber liability insurance?
- Do you collect credit card information at the point of sale?
- Do you run a website that processes credit card transactions?
- Are social security number, other account numbers, home addresses, email addresses, and phone numbers stored in files on your computers?
- Do you use a third party service in the “cloud” for hosting applications or data?
If your answer is “yes” to any of the above activities, you may be at risk for a cyber attack.
The high cost of a cyber breach
As revealed in the 2014 Cost of Data Breach Study: Global Analysis, sponsored by IBM, the average cost to a company was $3.5 million in US dollars and 15 percent more than what it cost last year.
In their recent publication of the Ponemon Institute Releases 2014 Cost of Data Breach: Global Analysis and sponsored by IBM, the results report:
“Critical to controlling costs is keeping customers from leaving. The research reveals that reputation and the loss of customer loyalty does the most damage to the bottom line. In the aftermath of a breach, companies find they must spend heavily to regain their brand image and acquire new customers. Our report also shows that certain industries, such as pharmaceutical companies, financial services and healthcare, experience a high customer turnover. In the aftermath of a data breach, these companies need to be especially focused on the concerns of their customers.”
“An interesting finding is the important role cyber insurance can play in not only managing the risk of a data breach but in improving the security posture of the company. While it has been suggested that having insurance encourages companies to slack off on security, our research suggests the opposite. Those companies with good security practices are more likely to purchase insurance.” To view the complete report, click here.
What are the key costs of a date breach?
In order to recover from a cyber attack, you’ll need a host of experts such as the people listed below.
- Legal support
- IT security
- IT repair/restoration
- Customer notification
- Credit monitoring for affected individuals
- Public relations
- Loss of customers/revenue
Make a plan – before the event
As your SMB grows, more systems are required to manage and mitigate your operations. Disaster recovery planning in today’s world includes cyber attacks. The steps listed below are a good beginning.
Incident Response Team. Include your IT, Human Resources, Public Relations, Legal, and Operations experts.
Investigate. Determine how widespread the breach is, if the system is secure, which data was compromised, and which customers were impacted.
Notifications. Contact your cyber insurance carrier and begin reaching out to your customers.
Repair. Gather your experts – both internal and external. Determine where and when your system was compromised. Track the man-hours spent on the recovery along with the overall cost of remediation. Build an internal and external communications plan.
Follow-up. Ensure your data is safe. Test and then re-test the systems. Plan and implement customer relations program.
Questions about cyber breach insurance?
Your questions are always encouraged and welcomed. We are ready to talk with you about your cyber breach insurance needs and concerns.
Dean & Draper is a Trusted Choice insurance agency representing over 200 insurance companies. For over 35 years we have offered a trusted freedom of choice to our clients. ContactUs.