Cyber attacks and data security breaches have become a recurring trend in today’s society—just ask Facebook’s, Mark Zuckerberg. This year alone, there have been well over 100 noteworthy data breaches or leaks across a broad spectrum of industries, including major brands such as Blackrock Inc., Instagram, Dunkin Donuts, and Fortnite1. While the larger breaches have propelled the emerging topic of cyber liability insurance into the limelight, businesses everywhere are faced with a compelling question: is cyber liability insurance really worth the investment?
As breaches become more common and destructive, organizations are still perplexed about coverage and, ultimately, uncertain if cyber insurance is a necessity. In this era of increasing regulation and public awareness of data security risks, you don’t want to risk critical information falling into the wrong hands. In a 2019 study by the Ponemon Institute and IBM, the average global cost of a data breach is $3.9 million, and a staggering $8.19 million in the United States. Securing protection for your customers and employees should be of the utmost importance.
What does this mean for the future of your business?
The landscape of technology is rapidly evolving. This means that the threats and liabilities businesses face, such as cyber-crime, will only increase. By assessing your business’ risks, you can be more prepared if an attack were to happen. But, the real question should be about the magnitude of a data breach. If it were to happen, how bad would it be? Here are some things to consider when deciding if cyber insurance is right for your business.
Is your business prepared for a cyber attack? How do you know?
What are your risks?
Would an attack create disastrous problems or simply be a minor setback? (Note: Even for small businesses, rarely are cyber breaches minor setbacks.)
Why would cybercriminals want your data?
Pro tip: Small or large, cyber attackers prey on the easiest targets with the weakest security.
The true cost of a cyber attack
The cost of a cyber breach goes beyond fines and remediation costs, and can also include:
Business Interruption—cyber breaches can force businesses to temporarily stop operations while investigations take place. This, in turn, causes decreases in profits, brand reputation, and customer/employee confidence.
Security Overhauls—once a breach occurs, your company may look into updating or implementing new security measures. Additional resources are spent on new software, installation, and training. And, while security measures should be proactively put in place, the cost of retroactively upgrading security protocols can prove to be even more expensive.
Business Closures—unfortunately, for those who are not prepared, cyber attacks can often lead to a complete shut-down of business operations. The time and resources spent trying to recuperate takes a large toll on the business’ finances.
As a business owner or leader, it’s important to determine if you could afford to pay for the resulting consumer claims and other requirements that could result from a cyber attack because, unfortunately; it’s not a question of ‘if’ your business will be attacked, but ‘when.’ While cyber liability insurance will not enhance your cyber prevention software or keep your passwords and sensitive information from being hacked, it will assist you in the case of a data breach, allowing you to quickly act and resolve the situation.
Every business should consider their exposure level in the event that sensitive data is compromised in a breach of data security. Stolen company laptops, deceptive employees, and hacker breaches can compromise the records of your clients and their sensitive information. So, is cyber liability insurance worth it? The short answer is yes.