Cyber Liability insurance has been available since at least the year 2000, however many small businesses in Australia are not taking advantage of the protections a policy can provide. According to one survey, just 40% of businesses1 have any sort of cover in place.
For many small businesses, this type of insurance may feel like an unnecessary expense. The odds that a hacker will target your business might seem slim. However, with 62% of small businesses2 reporting that they have been the target of cybercrime, it may be more likely than you think.
Virtually every company will at some point suffer some form of cyber security problem, whether that is a ransomware attack or a data breach. If companies don’t develop robust risk management plans and get the right insurance policies, this type of attack could be financially damaging, crippling to a business or could even drive a business to closure.
Below are five important reasons why you and your small business may want to consider Cyber Liability insurance to protect your business from threats.
1. Most small businesses rely on the internet
The internet is probably a big part of your business, even if you don’t sell products online. You likely use email to communicate with staff and clients, a website and social media to reach new customers, and a computer to store important financial or other business information. All that is needed for a business to come under fire from a cyber attacker is for any device with access to your company files to connect to the internet.
If any of your company’s computers or other devices are connected to the internet, you should consider Cyber Liability insurance. Nobody can guarantee that they will not be exposed to cyber risks (the Australian Cyber Security Centre reported a 13% increase in cybercrime in 2020-21). Cyber Liability insurance might be a key way for small businesses to help manage this risk.
2. Your business uses or stores customer personal data
Cyber Liability insurance may be essential if your business uses, stores or shares any personal information regarding your customers or clients. Personal information is the lifeblood of cyber security attacks, and if you collect or store it then you’re a potential target for hackers attempting to steal your data or manipulate it in other ways.
Personal information that hackers are looking for is anything that can be used to confirm a person’s identity like a telephone number, email address, postal address or full name. The Privacy Act states that you as a company have to make sure that you collect, use and store this information in a responsible manner that complies with the law.
Small businesses should take steps to decrease the risk of cyber-attacks. This may include creating risk management procedures that all employees must follow, having a plan for what to do if there is a data breach, and having a Cyber Liability insurance policy to cover claims if required.
3. The cloud isn’t completely secure
Cloud technology is now essential to many Australian businesses. While most files stored to the cloud are encrypted or otherwise secured, cloud data breaches do happen. If your customers’ personal data or confidential documents are downloaded from the cloud by back actors, it could cause major trouble for your business. Cyber Liability insurance can help protect your small business if this were to happen
4. A cyber-attack could financially destroy your business
It’s hard to quantify what a cyber-attack might cost you, but it is estimated that it could be anywhere in the thousands of dollars or more for each incident. This is more than enough to bring a small business to its knees. There are many other indirect costs, such as interruption or damage to your business, damage to your reputation and customer confidence, and rises in future insurance premiums.
Without Cyber Liability insurance, the cost of each cyber attack or breach would come directly from your business (and possibly personal) accounts or savings. A policy can help cover many of these direct and indirect costs, so you can hopefully get back on your feet and back to business as soon as possible.
5. Your current insurance policies may not cover against cyber attack
You may have Management Liability or Public Liability insurance policies, but that doesn’t guarantee that you are covered against a cyber-attack. Some business liability policies may provide some general cover in this area, but many provide no cover at all. A specialised Cyber Liability policy is the best way to protect your small business against the many risks associated with cyber attacks.
Preventing cyber attacks can save small business owners money and headaches. A proper risk management plan and a strategy for dealing with an attack if it happens can go a long way towards keeping your business and customers safe. However, if an attack or breach does happen, Cyber Liability insurance could help keep your business running and compensate your customers, if necessary.
- Cynch Security, January 2021
- Australian Cyber Security Centre, April 2020
Disclaimer: The information provided is a general guide only and does not take into account your personal objectives, financial situation or needs. This information should not be construed as any form of advice. Terms, conditions, limits and exclusions apply. Before making a decision, please consider the relevant Product Disclosure Statement (PDS) and Supplementary PDS (where applicable) available from relevant insurers.
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