What Happens If I Don't Have Cyber Insurance?

What happens to your business if you don't have cyber insurance?

You often hear that you need business insurance but you're not sure why or what happens if you don't have insurance for your business - specifically Cyber Insurance. As businesses and customers become more reliant on technology, Cyber Liability Insurance is also becoming a ubiquitous part of Business Insurance, especially as cyber attacks continue rising. It is often assumed that only tech companies and larger businesses need Cyber Insurance but think about how often or how much you use technology in your business; this includes emailing too! Hackers actually often attack smaller businesses because they usually have less resources or less security, making them easier targets. But what actually happens if you don't have Cyber Security Insurance? We break down common scenarios and how having Cyber Insurance can help.

Common Examples of When Do You Need Cyber Insurance:

If You Store Customers’ Data Online

Whether you use an in-house server or store your data in the cloud, there’s a good chance you maintain digital files filled with your customers’ private information. This information is a veritable goldmine for hackers and identity thieves, who can steal identities and financial information to open fraudulent accounts and even attempt to extort your business for cash payments.

Data Breaches Can Put You Out of Business

Without Cyber Liability Insurance, business owners are left footing the bill for damages that arise out of a breach. The National Cyber Security Alliance reports that one in five small businesses will experience a data breach — with an overwhelming 60 per cent closing their doors because they can’t recover from the financial fallout.

Can’t I Manage on My Own Without Needing Cyber Insurance Coverage?

Ask yourself: Do you have an incident response plan, disaster recovery plan and a business continuity plan? Unfortunately, many businesses don’t. Dealing with a cyber breach can be expensive and cyber insurance coverage is designed to help cover the costs associated with the breach.

A breach can result from a simple mistake. An employee might misplace a laptop, smartphone or USB drive, or leave these in an unsecured location - such as an unlocked car. In fact, the Ponemon Institute study found that 24% of data breaches are caused by human error.

Check out some more cyber security statistics from 2020!

What Could Happen If I Don't Have Cyber Insurance?

A security breach could result in losses of hundreds of thousands or even millions of dollars, not to mention an incalculable damage on your business' reputation.

Even a relatively minor breach can cost a business thousands. Costs typically include:

• Investigative fees

• Legal fees

• Business losses

• Data loss

Beyond the direct costs of dealing with and recovering from a cyber attack or data breach, there are also other costs that are harder to calculate. Of the businesses that reported a cyber security incident in 2017, 58 per cent experienced downtime as a result of the incident and 54 per cent found the event prevented employees from carrying out day-to-day work, according to Statistics Canada. Meanwhile, 53 per cent reported that the incidents prevented the use of resources or services (for example, desktop computers or email).

How Does Cyber Insurance Work?

There are two main types of Cyber Insurance coverage:

First-party Coverage

This coverage pays for immediate expenses that a company incurs after a cyber breach. This includes:

• Public relations costs, such as notifying employees and clients about a data breach

• Repairing any damaged software or hardware

• Protecting the company’s reputation with a marketing and public relations response

• Business interruption costs and missed income while business operations are suspended

• Extortion money (used to appease a hacker who threatens your data or systems unless you pay them a ransom)

• Other ancillary costs, such as paying for credit monitoring for customers

Third-party Coverage is mostly designated for legal claims.

Coverage may include:

• Privacy lawsuits claiming that you breached the privacy of customers or employees

• Fines from regulatory bodies

• Media liability claims, such as copyright infringement, libel or slander.

• Breach of contract or negligence claims

Some cyber liability policies include risk mitigation services to help prevent cyber attacks. Providers often evaluate policies, software and hardware to check for potential areas of weakness. Additionally, some insurance plans cover credit monitoring and fraud prevention before and after a cyber security incident occurs. They may also offer a hotline for customers affected by a breach.

Having Business Insurance, like Cyber Insurance, often just provides business owners peace of mind. Even if the worst does happen like a data breach or cyber attack, business owners can find some relief in knowing they have the proper insurance to provide a helping hand. Having business insurance simply often means having an advocate and financial support so you don't have to go through disaster alone! Our Foxquilt team will fight for you to get you the right, tailored coverage for your business and to help you during a claim. You can even access exclusive discounts on your premiums by joining the Foxquilt community. Get started today.