Every business has a number of liabilities that it is exposed to. It’s a smart idea to make sure that all your bases are covered, particularly if you are a startup. One area that presents more and more liabilities for California business owners is the cyber world. With the adoption of the internet in various industries, it is easier than ever to start a business online, even if you don’t have a brick-and-mortar storefront. For this reason, a business can opt to get a cyber insurance plan.
What is a cyber insurance plan?
Cyber insurance, also known as cyber liability insurance, is an insurance plan that allows a business to survive the aftermath of a cyberattack. According to a study by Kaspersky Lab, depending on the business’ vulnerability to attack, the kind of data that was lost and other factors, a small business can easily see a loss of $86,000, while bigger enterprises can expect to face costs of up to $861,000. These are just the numbers for a single attack. If a business suffers two or more attacks, it will most likely be unable to recover. Moreover, the business is also at risk of facing a class action lawsuit from the individuals who suffered from a loss of data because of the cyberattack.
Cyberattacks were once considered to be the problem of bigger businesses, largely because they are viewed as more feasible targets. In fact, HBO was in the news last year because hackers not only got into their system but also tried to extort the network to pay them to get their stolen data back. While HBO was able to survive the attack, not all businesses are as lucky. Data theft, hacking attacks and more have also become more commonplace. As internet usage has become more advanced, hackers have also developed advanced tools that allow them to worm their way through various firewalls. The targets that are most vulnerable to cyberattacks happen to be medium and small businesses. This is where cyber insurance kicks in by providing businesses with capital at such a vulnerable point. Without a cyber insurance plan, cyberattacks can easily bankrupt a business before it has even had a chance to properly start.
Why are small businesses at risk?
Small businesses in California, or anywhere else, are at risk due to the fact that they are so vulnerable and often run by people who are still learning the ropes. They’re not exactly aware of the risk they are facing in terms of cybersecurity. When businesses are starting out, they are looking to minimize their overall costs, and cybersecurity is one area where they usually skimp.
Moreover, they’re also vulnerable because they don’t understand what factors could be putting them at risk. The following are major ways in which small businesses face risks when it comes to cybersecurity:
• A breach of data is not just done by hackers and other faceless individuals on the internet. Sometimes, the attackers are internal. Yes, the call is coming from inside the house. It can be done by vendors, ex-employees, computer thieves and others. A business that doesn’t focus on its security is more likely to experience this.
• Small businesses also don’t think that they are targets because of their smaller size. On the other hand, the predator always hunts down the weakest member of the pack, and small businesses are the ones that are affected by security breaches the most.
• Small businesses in California don’t always pay attention to their cybersecurity. This is even more shocking considering that there are 8 million businesses that accept credit and debit card payments online.
• Many small businesses also have poor practices, such as not following proper security protocol. They may also have one computer that is used for both business and personal use. This increases the chances of experiencing security breaches.
Are cyber insurance plans a solution?
Never rely on your cyber insurance plan as a part of the solution. It should be considered a safety net on the off chance that your other security protocols are breached. This means that you should also invest in proper anti-virus software and more to provide your users with a secure platform.
Moreover, if you are a small business in California and your business keeps getting hacked, you will begin to lose credibility and eventually have to shut down shop. Always remember that no business is too small when it comes to cyberattacks, so it is always better to be cautious than sorry.
Post written by
Ken Goodwin – Ken Goodwin is the Managing Partner of Pacific Preferred Insurance.