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Why the 31% of Businesses without Cyber Insurance Should Scare You

Why the 31% of Businesses without Cyber Insurance Should Scare You

31 percent of businesses don't have Data Breach Insurance, which means they might sue you over breaches they experience. Learn what to teach your clients about cyber risk.

Thursday, November 20, 2014/Categories: cyber-risk

Insurance Journal reports on a study that shows 60 percent of businesses think cyber risks are very high for them, but 31 percent still have no Cyber Liability Insurance whatsoever.

You might be wondering why a client's insurance coverage matters to you. Clients without coverage could sue you to make up for the cost of a data breach.

If a client has Cyber Liability Insurance, they have insurance to pay for their data breach response. The insurance company pays for…

  • Customer notification.
  • Forensic investigations to determine the cause of the breach.
  • Other cleanup costs.

Clients without coverage have to pay for these costs themselves. After a breach, that could be thousands of dollars out of pocket, and many small-business owners sue their IT consultants to make up for their losses.

IT consultants should not only advise their clients about the technical threats to their cyber security, but also help them prepare for the financial losses that can accompany a data breach.

21% of Businesses Might Need an Upgrade for Their Cyber Crisis Response Plan

The same survey also found that 21 percent of businesses hadn't updated their data breach crisis response plan in the last 12 months. As more businesses become concerned with data security, there will be more opportunity for IT contractors to perform security audits and review data breach response guides. But will businesses actually invest more in data security? According to new research: yes.

IT research firm Gartner reports that businesses are expected to increase their data security spending by 7.9 percent in 2014. Gartner also projects that by 2018, more than half of businesses will hire an outside firm to manage their data security.

These statistics show that data security will likely be one of the fastest growing areas of IT. Contractors who offer managed security services will be in a good position to take advantage of this growth.

Resources to Help Your Clients Prepare for Data Breaches

As your clients' data security needs grow, don't forget how important it is to educate them about these data risks. Many businesses are unfamiliar with the concepts behind data security, so be prepared to guide them through the basics.

To help you, TechInsurance has put together a customer resource packet, which you can share with clients. This guide – which is free to download and distribute – includes...

  • Checklists.
  • FAQs.
  • Risk management plans.
  • Other pertinent materials.

This informational packet is a valuable resource that can teach your clients about data breaches and the best ways to manage cyber risk.

IT Contractors: How to Manage Your Risk of Lawsuit

While you can recommend clients adopt a certain cyber risk management approach, you can't guarantee they'll execute it properly. You can educate clients about data security, but you can't prevent all data breaches. There will always be some risk of a cyber attack, data leak, accidental disclosure, or other cyber liability. And with these risks, there's always the threat that you'll be sued.

How do you cover your IT lawsuit risk? Technology Errors and Omissions Insurance covers lawsuits over your work. If a client thinks you could have done more to prevent a data breach, E&O Insurance can pay for your lawsuit expenses.

For free quotes on IT insurance, submit an online insurance application.

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