December 17, 2024
In 2024, cyberthreats are no longer just a big-business problem. In
fact, large corporations with deep pockets are not the primary target for most cybercriminals.
Less well-defended small and medium-sized businesses are increasingly at risk,
with the average cost of a data breach now totaling over $4 million (IBM). For many smaller businesses, an incident
like this could be devastating. This is where cyber insurance comes in. Not
only does it help cover the financial fallout of a cyber-attack, but it's also
a safeguard to help your business recover quickly and keep moving forward in
the event of an attack.
Let's break down what cyber insurance is, whether you need it and what
requirements you'll need to meet to get a policy.
What Is Cyber Insurance?
Cyber insurance is a
policy that helps cover the costs related to a cyber incident, such as a data
breach or ransomware attack. For small businesses, this can be an essential
safety net. If a breach happens, cyber insurance can help cover:
●
Notification Costs: Informing your
customers about a data breach.
●
Data Recovery: Paying for IT
support to recover lost or compromised data, such as restoring computer
systems.
●
Legal
Fees: Handling potential lawsuits or compliance fines if you're sued because of
an attack.
●
Business Interruption: Replacing
lost income if your business shuts down temporarily.
●
Reputation Management: Assisting
with PR and customer outreach after an attack.
●
Credit
Monitoring Services: Assisting customers impacted by the breach.
●
Ransom Payments: Depending on your
policy, cyber insurance will cover payouts in some cases of ransomware or cyber
extortion.
These policies are
typically divided into first-party and third-party coverage.
●
First-party
coverage addresses losses to your company directly, such as system repair,
recovery and incident response costs.
●
Third-party coverage covers claims
made against your business by partners, customers or even vendors who are
affected by the cyber incident.
Think of cyber
insurance as your backup plan for when cyber risks turn into real-world
problems.
Do You Really Need Cyber
Insurance?
Is cyber insurance legally required? No. But, given the rising costs of
cyber incidents, it's becoming an essential safeguard for businesses of all
sizes. Let's look at a couple of specific risks small businesses face:
●
Phishing
Scams: Phishing is a common
attack targeting employees, tricking them into revealing passwords or other
sensitive data. You would be shocked at how often we do phishing tests in
organizations and multiple people fail. Your employees cannot keep your
business safe if they don't know how.
●
Ransomware: Hackers lock your files and demand a ransom to
release them. For a small business, paying the ransom or dealing with the
fallout can be financially devastating. Not to mention, in most cases, once the
payment is received, the data is deleted anyway.
●
Regulatory
Fines: If you handle customer
data and don't secure it properly, you could face fines or legal actions from
regulators, especially in sectors like health care and finance.
While having strong
cybersecurity practices is critical, cyber insurance acts as a financial safety
net if those measures fall short.
The Requirements For
Cyber Insurance
Now that you know why cyber insurance is a smart move, let's talk about
what's required to qualify. Insurers want to make sure you're taking
cybersecurity seriously before they issue a policy, so they'll likely ask about
these key areas:
- Security
Baseline Requirements
○
Insurers will check that you have
basic security measures like firewalls, antivirus software and multifactor
authentication (MFA) in place. These are foundational tools to reduce the
likelihood of an attack and show that your business is actively working to
protect its data. Without them, insurers may refuse coverage or deny claims.
- Employee Cybersecurity
Training
○
Believe it
or not, employee errors are a major cause of cyber incidents. Insurers know
this and often require proof of cybersecurity training. Teaching employees how
to recognize phishing e-mails, create strong passwords and follow best
practices goes a long way toward minimizing risk.
- Incident Response And Data Recovery Plan
○
Insurers
love to see that you have a plan for handling cyber incidents if they occur. An
incident response plan includes steps for containing the breach, notifying
customers and restoring operations quickly. This preparedness not only helps
you recover faster but also signals to insurers that you're serious about
managing risks.
- Routine Security Audits
○
Regularly auditing your
cybersecurity defenses and conducting vulnerability assessments help ensure
your systems stay secure. Insurers may require that you perform these
assessments at least annually to catch potential weaknesses before they become
big problems.
- Identify Access Management (IAM) Tools
○
Insurers
will want to know that you're monitoring who is accessing your data. IAM tools
provide real-time monitoring and role-based access controls to make sure that
only select people have access to the data they specifically need when they
need it. They'll also check that you have strict authentication processes like
MFA to enforce this.
- Documented Cybersecurity
Policies
o
Insurers will want to see that you
have formalized policies around data protection, password management and access
control. These policies set clear guidelines for employees and create a culture
of security within your business.
This is only the tip of the iceberg. They'll also consider if you have
data backups, enforce data classification and more.
Conclusion: Protect
Your Business With Confidence
As a responsible business owner, the question to ask yourself isn't if
your business will face cyberthreats - it's when. Cyber insurance is a critical
tool that can help you protect your business financially when those threats
become real. Whether you're renewing an existing policy or applying for the
first time, meeting these requirements will help you qualify for the right
coverage.
If you have questions or want to make sure you're fully prepared for cyber insurance, reach out to our team for a FREE Security Risk Assessment. We'll evaluate your current cybersecurity setup, identify any gaps and help you get everything in place to protect your business. Click here or call our office at 757-720-6001.