Can Your Business Afford Not To Have Cyber Liability Insurance?

Essential words of wisdom in our Guest Post from Jonathan Mayotte, CIC, with Thornton Powell.

To our flex workspace and coworking readers – consider this tool for you when selling online memberships to your space.

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One of the most common things that insurance agents hear when we speak to one of our clients and prospects about cyber liability policies is, “We don’t need that, we have a great I.T. guy who set up all these great firewalls and virus protections.” That’s great to hear, but hackers do nothing but sit around and find ways to get past those firewalls and anti-virus programs. Or another one we will hear is, “We don’t need that, hackers only go after big companies like Target or Home Depot.” Actually, you are a hacker’s prime target because it allows them to fly under the radar.

Online activity has increased across the board the last couple of years because of the pandemic. Many businesses are operating almost entirely online. Brick and mortar retail operations have moved to the web. Employees are working from home, oftentimes using their own equipment and networks. The environment is ripe for ambitious hackers to expose flaws in cyber protection programs, or take advantage of businesses who have little to no safeguards in place. Right now, your business can’t afford NOT to carry a cyber liability policy.

The following are a few examples of how a cyber liability policy can act as your backup when your frontline protection fails:

Imagine you are a retail business and the majority of your sales are online through your website. One day you get an email notifying you that your website has been compromised with ransomware and the only way you can regain control of the site is to pay a ransom of $25,000. Your business generates about $40,000 a month in revenue, or just under $500,000 a year in sales. If you have to pay that ransom it’s going to cut into over half of your sales for that month, plus you will have lost sales while the website is down. This could cause a major financial hardship for your business. A cyber liability policy will pay the ransom and will extend business income interruption.

Or say you own a medical device manufacturing business. Your office staff and sales force work remotely. Your office manager, who is in charge of cutting checks to vendors, receives an email that she believes is from the CFO asking the office manager to wire $100,000 to an account that appears to belong to a vendor. A week later the CFO asks the office manager why $100,000 was wired to the account. The office manager states she received an email from the CFO asking her to wire the funds. The CFO states he never sent that email and an audit of the CFO’s email confirms this. Turns out a hacker was able to mirror the CFO’s email address and signature to make it seem like a legitimate request. Without cyber liability, your company is now out of $100,000.

For our last example we will use a doctor’s office. You have files on your server that contain medical histories and sensitive information on your patients. Your I.T. person notifies you that the firewall on the server was breached and your patient files have been accessed by a hacker. HIPAA requires you to notify any individuals who may be affected by the breach, you must notify the media, and you must also notify the Department of Health and Human Services.[1] You will also have a public relations mess to clean up on your end. All of these things will require time and money. Cyber liability will help you pay for notification, any defense costs associated with potential lawsuits, and public relations costs to help you restore your reputation.

It’s not a matter of if a cyber-attack will happen, but when a cyber-attack will happen, and will you be prepared when it does. Here are some eye-opening numbers that really drive the point home:

-43% of cyber attacks target small businesses, 60% of which go out of business within six months.[2]

-Incidents cost small businesses an average of $25,612, according to insurance carrier Hiscox.[3]

-More than half of small businesses suffered a data breach within the last year.[4]

-43% of workers surveyed in the report, The Psychology of Human Error admitted to making mistakes that resulted in cybersecurity repercussions.[5]

Bottom line: your business cannot afford to not to have cyber insurance. There are hackers who are coming up with new ways of breaching systems each minute. Their goal is to find the weakness in any protection system. Each system will have its weakness. Do not allow your business to become a statistic. Talk to an insurance agent today about cyber liability and protect your livelihood and the livelihood of your employees.

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[1] “Breach Notification Rule”, HHS.com, https://www.hhs.gov/hipaa/for-professionals/breach-notification/index.html

[2] Maddie Shepherd, “30 Surprising Small Business Cyber Security Statisticis (2021)”, Fundera.com, published 12/16/20 https://www.fundera.com/resources/small-business-cyber-security-statistics

[3] “The Average Annual Cost of Cyber Attacks for a US Small Business is $25K Reveals Hiscox Cyber Readiness Report 2021”, Hiscox.com, published 5/13/21 https://www.hiscox.com/articles/average-annual-cost-cyber-attacks-us-small-business-25k-reveals-hiscox

[4] Scott Steinberg, “Cyberattacks now cost companies $200,000 on average, putting many out of business”, CNBC.com, published 10/13/19, updated 3/9/20 https://www.cnbc.com/2019/10/13/cyberattacks-cost-small-companies-200k-putting-many-out-of-business.html 

[5] Ryan Smith, “Nearly half of employees have made cybersecurity errors – report”, InsuranceBusinessMag.com, published 7/22/20 https://www.insurancebusinessmag.com/us/news/cyber/nearly-half-of-employees-have-made-cybersecurity-errors–report-228496.aspx

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Jonathan Mayotte  is a Commercial Insurance Agent with Thornton Powell and has been with the agency since 2013 advising businesses on their Property & Casualty Insurance program. Jonathan started his Insurance career in 2012 with an Allstate agency in West Palm Beach, FL. Prior to Insurance, Jonathan worked for twelve years in the radio industry as a Disc Jockey, Program Director, and Production Director. Jonathan graduated in 2005 from Illinois State University with a B.S. in Political Science and achieved the coveted designation of Certified Insurance Counselor in 2020.

Jonathan enjoys music, playing golf, watching sports, and spending time with family and friends. Jonathan and his wife reside in the Lincoln Park neighborhood of Chicago and he serves as Chairman of the Board for the Lincoln Park Chamber of Commerce.

 

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