It should be of no surprise that in today’s society with technology advances, social media, and new privacy laws, that cyber threats have become a growing concern among businesses. These threats are not just for large retailers either like Walmart or Home Depot, hackers are targeting small businesses as well. A recent article by CNBC A fast-growing threat to small business: Hackers discusses a small business owner Kevin Stecko, who was a victim of a cyber crime.
Kevin operates a T-shirt business 80Tees.com, and in January Discover notified him that cardholders using his website had experienced suspicious transactions on their accounts. The company immediately stopped all credit card transactions on their website, and notified the authorities. However, no evidence of a breach was detected. A few months later the other major credit card companies notified 80Tees.com that they too were experiencing complaints about fraudulent activity, confirming Stecko’s fears: The personal personal data of thousands had indeed been compromised.
This cyber crime resulted in the business having to pay $200,00 to solve the issue, which doesn’t include the loss in revenue while the website was only accepting PayPal transactions. Unfortunately this large loss was not covered by their standard business insurance policy, but could of been covered if they purchased Cyber Liability. Most insurance companies can provide special policies specifically targeting these types of exposures. Travelers Canada (one of our insurance carriers) for example has a product called CyberRisk, which will cover you for things like: Third party liability, worldwide coverage, first party coverage for computer fraud and funds transfer fraud, business interruption, communication and media coverage, etc. This policy and others like it you could expect to pay premiums ranging from $500 to $2000 a year for a small business. Large companies such as 80Tees.com, however, can expect to pay considerably more.
“Small businesses face many of the same cyberrisks as large corporations, including data breaches, the liabilities and lawsuits that follow after confidential customer data is stolen, and the business interruptions due to attacks that cripple websites. Cyberrisk insurance covers these issues, as well as acts of extortion and the introduction of malicious code or viruses.”
“One of the reasons why smaller businesses are vulnerable to hackers is that many lack an IT department and tend not to be as diligent as larger companies about security. That attitude, though, is changing.”
Here are a list of four compelling reasons why your small business should have cyber coverage
1. Your general policy won’t cover an attack – Some business owner’s are under the impression that their commercial general liability policy will cover them for cyber attacks. This is not the case, some insurers may provide a very limited coverage for select types of attacks, but even that is not common place.
2. The cost of an attack can be devastating – 31% of cyber crimes happen to businesses with a staff of 1 to 250 people, and costs them an average of $3.5 million per attack, according to Ponemon Institute’s 2014 data breach study. Cyber attacks aren’t as clear cut as a simple automobile fender bender for example, it’s sometimes hard to determine how many records were affected, and could result in many other costs that you wouldn’t think of. Not only do forensic examiners need to be hired but also lawyers, security consultants, and public relations firms.
3. Regulations and laws – There are laws and statutes that businesses need to aware of, and will have to comply with if their network has been compromised. Failure to abide by these laws could result in fines. These laws may require credit monitoring to be set up, forensic investigators to be hired, or the use of crisis communications consultants, which you can imagine won’t be a cheap process.
4. Business Interruption – When there has been a breach of your companies system, or online website, it may require you to shut down your business operations until the problem has been resolved, and new adequate security systems have been put into place. When your business isn’t generating any income for a considerable amount of time it could seriously hurt your business financially. Most insurance cyber crime policies will have business interruption coverage to prevent this.
CNBC: A fast-growing threat to small business hackers
Travelers: Cyber+ coverage
CanadianUnderwriting.ca: 64% of Canadian CEOs surveyed expressed concern about data security
Phonemon Institute: 2014 Cost of data breach
CNBC: Why cyber-insurance will be the next big thing
Symantec: Internet security threat report 2013