Cyber Insurance – Does Your Business Need It?

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Back in the old days when everything was recorded manually, chances of information breach meant misplacing record books, destruction of record books due to natural calamities, and other such mishaps. Today, the breach of information is far more complicated as almost every business stores its digitized data on workstations connected to the internet or on third party servers. The advent of the cloud technology has further complicated the task of keeping confidential business data safe. We can access, store, and feed customer information, credit card details and place or process orders, payments etc. with the click of few buttons, from various devices like laptops, tablets and even cell phones but these benefits do not come without side effects. That said, cyber insurance is the emerging risk protection solution.

All important employee and customer data is stored on business networks, which are and will always be prone to cyber attacks. Hackers can access the account information of your customers, or employee passwords and pose a potential threat to your business.

Business owners and senior executives have a misconception that only high profile and high risk companies require cyber insurance, when in fact, during 2012, it was small and medium businesses that were hit hardest by information breaches as many were either completely defenseless against even small time hackers or had little funds to hire IT system security experts. According to statistics published by the Forbes Magazine, the US Secret Service and Verizon Communication Inc. estimated that 72% of all the data breached in 2012 occurred in small and medium businesses.

In today’s age of information, many businesses can get cyber insurance customized to suit their unique requirements. For example, an online retailer will need a cyber insurance policy with extensions because it needs cover against information breach of hundreds or thousands of customers that shop online and perhaps network interruption cover. If it’s a manufacturer that runs a website on the internet, a base cyber insurance cover against information breach, personal and corporate data liability, outsourcing, data security and defense costs can suffice.

If you’re looking for even more valid reasons that justify the necessity for protecting your business with cyber insurance, read on!

A General Policy Won’t Cover Information Loss

A typical general corporate insurance policy will not cover you for any loss of information due to cyber, virus or hacker attacks etc. A good cyber insurance policy protects you beyond a point where a general insurance policy leaves you.

The general policies and business packs typically cover tangible assets, and ironic as it will sound ‘information’ in the age of information is not considered as a tangible asset.

Not Many Businesses Can Afford Risk Management Teams

Large corporations have the resources to invest in an entire department for risk management. But, when it comes to small and medium businesses, they’d rather hire a good insurer, who can perform complementary functions in order to protect interests of an organization, but at a much lesser price.

In fact, the process of placing cyber insurance will not only help you bridge the insurance gap, but also encourage businesses to review their security protocols in relation to their online activities. For example, cyber insurers will require that your firewalls are in place to protect your network.

Cyber Insurance Can Cover More Than You Think

The cost of cyber breach is not limited to first party coverage, but it includes many other expenses like business interruption, hiring of a public relations firm for damage repair etc. In many cases, the compensation money will be needed by a company hit hard by data loss or legal cases to survive till it resumes its natural cash flow.

All the above becomes even more valid for small companies that are limited to a single business. Bigger businesses can compensate the loss by adjusting money from various lines they run, but if you have a single line of business, your company will have to shut down due to information breach.

General advice Disclaimer

This Blog contains general advice only. It has been prepared without taking into account your particular objectives, financial situation or needs. Before acting on the advice, you should consider the appropriateness of the advice, having regard to your objectives, financial situation and needs.

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