The recent hacks of Sony and Home Depot show just how much damage data breaches can do to big businesses. But a company doesn’t have to be multinational in order to attract the eyes of hackers. In fact, experts estimate that 44 percent of small businesses have been the victims of cyber attacks. According to the National Small Business Administration, each breach costs companies an average of $8,700 in damages.
“Cybercrime is in the news all the time, but there’s a huge misconception that it only impacts big companies,” says Ted Devine, CEO of a small business insurer. “The reality is that anybody that has forms of client data exposes themselves to cyber risk.” This includes everything from simple e-mail lists to billing information for all of a company’s customers. With so much data at stake, many small businesses are turning to insurance companies like Devine’s in order to cover all their bases. American businesses spent an estimated $2 billion on cyber insurance premiums in 2014, jumping 67 percent from the year before. Although insurers wrote enough premiums in 2014 to total more than $1 trillion, analysts expect the amount companies spend on cyber insurance to increase exponentially.
Many companies are already lining up for coverage. A recent survey found that 33 percent of small and midsize U.S. employers now have a cyber liability policy in place. And while they may not be able to spend as much on security equipment as their larger competitors, small companies have plenty of affordable options when it comes to cyber insurance plans. Plus, sometimes being prepared for the worst is simply good for business. For example, a Texas data analysis startup called Bowman & Partners began shifting its information to the cloud at the same time it was chasing the business of a big healthcare company. The potential client informed Bowman of the risks involved with cloud storage and said the company would need to be insured against cyber attacks. Bowman agreed to the client’s request and won their trust with a comprehensive cyber insurance plan. So even if executives don’t appreciate the added costs that come with hacker prevention policies, it’s likely that the company’s clients will.
- Why is cyber insurance expected to grow significantly in the future?
- Why are small businesses very susceptible to data breaches?
Source: Jason Ankeny, “Better Safe Than Sorry,” Entrepreneur, February 1, 2015. Photo by: Bareform.