Cyber Insurance – what is it and why do we need it?
When many people think about cyber risks, it seems to be that the prevalent thought is that these risks are a “big business” concern. But is this assumption correct?
We all might have an idea that cyber security risks are on the rise, it makes sense with the increased use and reliance of the internet for business transactions and storage, but what may come as a surprise is that cyber risk is one of the highest, if not the highest, ranking risk faced by all businesses today.
Cyber risk affects all organisations, regardless of industry sector or size and research is clearly showing that small business are in fact a main target for security breaches mostly due to the ease hackers can gain access due to reduced security measures.
The following informative article by “Know Risk” discusses the issue of cyber risk by exploring the effects of one large cyber-attack on one Australian SME business.
“Small businesses are the most vulnerable
The case of IP provider Distribute.IT highlights how quickly a business can be affected by a cyber-attack.
On 11 June 2012, Distribute.IT had a major incident which shut down their entire network for two days. Over the next four days, the company received a huge amount of negative publicity on both social media and in the news and by 15 June, management was forced to let staff go.
Over the next week, the company had numerous meetings with the Australian Federal Police, the Privacy Commissioner, government bodies and regulators over compliance related breaches. By 20 June, the company was in the hand of liquidators, and by 23 June, all staff had been let go and all assets had been sold, sealing the end of the company.
Understand the risk
Take stock of your business and your client base and think how your business would cope if over 75% of your customers stopped doing business with you. If your business falls victim to a cyber-attack, this is a very likely scenario.
Recent studies have shown that the damage to your business’ reputation can be irreparable, with 85% of Australians saying that would stop doing business with a business if their data was breached.
Cyber-attacks or data breaches can take many forms, from deliberate attacks to technology issues or simple negligence. As modern business is reliant on computer systems and networks, a breach of data or a shut-down of service can have a major impact on your business with many small businesses unable to operate afterwards.”
As traditional Business Insurance policies do not cover this comparatively new and fast growing type of risk, and with the increased in severity and frequency of cyber breaches, the need for cyber insurance is growing.
Most cyber policies include cover for the 4 following types of losses:
- Losses to Your Business: Costs and revenue replacement if external supplier suffers a Cyber Event.
- Loss to Others: Costs and revenue replacement if external supplier suffers a Cyber Event.
- Cyber event response costs: Costs incurred through event response and management services.
- Contingent Business Interruption: Costs and revenue replacement if external supplier suffers a Cyber Event.
It is important to speak to your Insurance Broker about insuring your risk and protecting your business.