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Cyber Risk Insurance: More Important for Smaller Firms?

Cyber Risk Insurance offers key protections for small businesses that some larger firms don't need.

Monday, March 24, 2014/Categories: cyber-liability

A lot of advice written about managing a data breach is targeted to large corporations. Analysts suggest assembling teams of members of your HR, marketing, PR, IT, and legal departments to craft a data breach response strategy – but for many small-business owners, there’s nobody else around to figure out how to handle a breach event. Instead, they have to address the problem on their own.

In addition, large corporations that experience a data breach often have adequate financial resources to do damage control, which  might include launching a public relations campaign to repair their reputation, replacing lost equipment, or training employees in data protection protocol.

But unless they have a Cyber Risk Insurance policy, few small-business owners have adequate resources on hand to fund a data breach recovery.

When Do You Need Cyber Risk Insurance?

While the cyber risks faced by small technology companies may have a greater potential to cause financial damage than those faced by large corporations, not every small tech firm needs a Cyber Risk Insurance policy.

Chances are good that your business could benefit from the protection offered by a Cyber Liability policy if you…

  • Store customer data. Theft, disclosure, or misuse of client information stored on a network can cause significant losses for your clients. Third-party Cyber Risk Insurance policies typically cover the costs associated with such incidents, which are considered “misuse” of customer data.
  • Build applications or websites online. If your products or services fail to prevent a company’s site from being hacked or protect a client’s email system from being phished, for example, you could be found liable for data breach expenses. Cyber Liability Insurance can protect against these incidents.
  • Have the capacity to transmit or fail to prevent the transmission of a virus to your clients. Even accidental transmission of a virus to one of your clients can be grounds for holding your liable for virus transmission. Most companies that maintain email correspondence with clients have at least some chance of inadvertently transmitting a virus.

How Much Does Cyber Risk Insurance Cost Small Businesses?

The good news is that Cyber Risk Insurance is not cost-prohibitive for most small technology firms. While the cost of a policy will vary greatly based on the specific details of your business, there’s a good chance you’ll be able to choose coverage options that suit both your coverage needs and your budget.

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