As cyber attacks continue to grow in frequency and complexity, more businesses ask, “Is Data Breach Insurance worth it?”
The short answer—“Yes!”
According to the Identity Theft Resource Center (ITRC), 2022 saw a near-record number of data compromises—1,802. That number is only 60 events shy of the all-time high set the year before. These breaches affected more than 422 million individuals.
The most commonly affected data in security breaches were individuals’ names, full Social Security numbers, and dates of birth. Other sensitive customer information put at risk included medical histories, banking details, and insurance account numbers.
Compromised data can cost not only individuals but also companies dearly. The ransoms, lost business, system restorations, and third-party notification expenses (among other costs) associated with breaches add up.
The average total cost of a data breach in 2022 was a record-setting $4.35 million, according to IBM Security. And the per-record cost of a breach was its highest in seven years—$164.
Other common forms of business insurance, such as Professional Liability Insurance, don’t usually cover costs associated with cyber risks. Without a dedicated Data Breach Insurance policy, businesses often find themselves “on the hook” for more than they can afford.
And while virtually all modern enterprises are at risk, understanding what data breaches can cost small and medium-sized businesses (SMBs) is particularly important.
ProWriters believes when your business clients ask about purchasing insurance against cyber attacks, you owe them more than the short answer.
You need to help them understand how much a breach really costs and how much critical protection and peace of mind Data Breach Insurance provides.
Who Needs Cyber Security Insurance Today?
Any business using the internet or computers can benefit from Cyber Security and Data Breach Insurance. A business is vulnerable whenever it:
- Accepts payments online.
- Accepts in-store credit card transactions.
- Communicates with customers online or via voice over internet protocol (VoIP).
- Stores personal information electronically.
- Transfers documents electronically.
While virtually all modern enterprises are at risk, understanding what data breaches can cost small and medium-sized businesses (SMBs) is particularly important.
Cyber criminals often prefer to target SMBs. They think SMBs are less prepared and more vulnerable and less prepared for ransomware attacks or other incidents
They’re usually right.
A remarkable survey of small-business owners in 2021 found the majority (56%) were “unconcerned” about cyber attacks. A scant 28% had cyber incident response plans in place. Yet that same year, 61% of SMBs were targets of cyber attacks.
“Recent studies have shown that the average cost of a data breach to small business can range from $120,000 to $1.24 million,” writes Andrew Rinaldi, “and that’s strictly limited to a small-business market.”
Third-party exposure presents a particular problem for businesses. Transferring services to a third party doesn’t transfer liability. Companies without Cyber Attack Insurance often pay the price when one of their vendors is attacked.
Even businesses not handling sensitive information remain at risk. Cyber criminals often don’t care what kind of information a company has, especially when they target SMBs. Motivated by financial gain, hackers can hold a network hostage or demand payment in exchange for restored access to vital company records, no matter the type of data involved.
Payments made in response to ransomware attacks can be significant, but so are lost revenue and other costs associated with a breach. The costs of dealing with a cyber attack can keep climbing long after the incident occurs. Companies without a Data Breach Insurance policy must pay all of these expenses out of pocket.
How Cyber Security Insurance Coverage Can Help
The cost of Cyber Liability Insurance is a small price to pay for breach coverage that comes with experts who are ready to help the moment a cyber attack happens.
A Cyber Insurance policy goes a long way toward ensuring a business can survive financial losses stemming from a data breach.
Competitive policies include preventive measures to protect businesses from a breach and incident response measures in the event a breach occurs. They will also cover such costs as legal fees, data recovery, and loss of income due to a business interruption. Additionally, some insurance policies offer risk management services to help prevent cyber attacks from occurring in the first place.
As a registered ProWriters broker, you can use our powerful Cyber IQ platform to find and quote multiple Cyber Insurance policies from top carriers.
In addition, ProWriters lets you find and quote Cyber Liability Insurance policies that cover the costs of:
- IT forensics
- Business income lost due to interruption
- Notification of affected parties
- Credit monitoring services for affected individuals
- Regulatory defense
- Fines and penalties
- Repair and restoration costs (networks and devices)
The next time a business client asks you whether Data Breach Insurance is worth it, be ready to tell them exactly why it is.
Download our free infographic, Cyber Risk Management 101.Use it to help your clients appreciate how the right Data Breach Insurance policy can protect them.