Cybersecurity insurance for small businesses is essential in keeping costs low in the event of a breach. In fact, Cybercrime Magazine predicts that by 2025, the annual cost of cybercrime to the global economy will reach $10.5 trillion. That means businesses everywhere are paying large sums of money if their cybersecurity fails—and some businesses can’t afford it. Plus, a large number of small business owners don’t think they’ll be a target of cybercrime. Unfortunately that’s not the case. And although not obligated by law, if you choose to insure your business, cybersecurity insurance requirements typically give you a safeguard if security is breached. You’ll also have a deep security network that keeps your business’s data safe. So how does cyber insurance affect small businesses? We explain the importance of cyber insurance and why your small business clients need it below.
What Is the Importance of Cybersecurity in Small Business?
Every business is susceptible to cyberattacks—especially those without cybersecurity measures in place. Because of this, the Federal Communications Commission (FCC) stated that every company doing business online is responsible for promoting a climate of security that will increase safety and protection of both companies and customers. The main reason why companies must pay greater attention to their cybersecurity infrastructure is that cybercrime has increased rapidly over the last few years. In fact, 61% of small businesses were the target of cyberattacks and 46% of those businesses had fewer than 1,000 employees. Without a thorough cybersecurity strategy, businesses would be defenseless against various cybersecurity risks, making it an easy target for cybercriminals.
Why is cybersecurity so important for insurer’s to emphasize? Ultimately it’s about keeping company data—and customer data—safe from malicious actors. As a cyber security insurance for small business provider, it might be surprising to learn that, despite small businesses being such a large percentage of attacks, only 14% have a cybersecurity plan in place. That means companies and customers all around the world are susceptible to cyberattacks without a safeguard. Whether cybercriminals use malicious software or phish information, many small businesses would benefit from introducing cybersecurity and cyber insurance measures. When it comes to cybersecurity, cybercriminals are aware that many small businesses lack the infrastructure that major companies need to safeguard their data—and that makes them vulnerable.
As an cyber insurance provider, using Trava can help you manage your clients’ cybersecurity needs with valuable insights—and help them navigate any potential issues. That will help keep their small businesses safe from any malicious activity on the horizon. But what impact do cyberattacks have on small businesses? And how can you help?
How Does a Cyber Attack Affect a Small Business?
A small business could suffer significant losses if it falls victim to a successful cyberattack. Malicious attacks have the potential to damage company finances, as well as the standing of their company among competitors and the trust of their customers. Some of the impact of cybercrime on business leads to significant harm to the business, including:
Theft of money or information
Costly downtime and loss of productivity
Damage to reputation with other businesses and customers
Expensive recovery of data and systems
It’s important to note that very small businesses are highly susceptible to malware, ransomware, brute-force attacks, and social attacks—and may not survive even a single incident—according to Verizon's 2022 Data Breach Investigations Report. This not only leads to losses to a company’s bottom line, but can impact their ability to rebound as well. In fact, the average global cost of a data breach jumped to $4.35 million—in the US it reached $9.44 million. That’s no small chunk of change, and many businesses cannot afford those high costs. It’s important you share statistics like these with your clients, so they understand the full scope of cybercrime and the likelihood of them being attacked.
Customers are also vulnerable to the financial effects of cybercrime on businesses. IBM found that 60% of organizations that were attacked by cybercriminals ended up raising prices as a result. Not only can this damage their business’s reputation, but the consumer ends up footing the bill.
All of these factors should be considered when businesses look for solutions, like cyber insurance. But how much should a small business spend on cyber security insurance? Is it really worth it?
Do Small Businesses Need Cyber Insurance?
Yes! All small businesses should invest in cybersecurity measures, including cyber insurance. Businesses need cyber insurance for financial protection in case of a breach—especially if it handles or keeps personally identifiable information of customers or employees online. In today's world, cyberattacks are inevitable and cyber insurance is a vital lifeline for when the worst happens. Simply put, small business cyber insurance helps mitigate the costs that may be collected following a potential incident and compensates for legal bills.
How can you help small business clients understand the value of cyber insurance? How can cyber insurance help small businesses rather than large businesses? Unfortunately, many small business owners don’t think their business will be targeted—even if they hold sensitive data. And while small businesses can put cybersecurity protections—like using antivirus software, multi-factor authentication, and a firewall or VPN—into place, it ultimately comes down to cost. Can they afford a data breach—and its consequences? What about a ransomware payment? Larger companies have more financial resources than small businesses, and cyber insurance provides security for covering an incident.
Another advantage small businesses might greatly benefit from are the additional services and coverage typically included in cyber insurance policies. Cyber insurance typically covers data breaches, on-premises and third-party server corruption, and domestic and international cyberattacks. Costs can add up if not properly protected. This is especially important for companies that have increasing revenue, a growing customer base, a large amount of stored data, and valuable digital assets. With your cyber insurance coverage, a small business can get the several layers of defense it needs against cyberattacks from a single insurance policy.
What Percent of Small Businesses Have Cyber Insurance?
According to a CNBC survey, only 26% of small businesses say they have cyber insurance coverage. Why so few? It’s mostly due to overconfidence in their cybersecurity response. In fact, 80% of respondents aren’t worried about a cyberattack happening to them in the next 12 months (or at all). Insurance can also be rather expensive, but programs like Trava provide insights that can help you offer better security and better rates for your clients. Because of their confidence and the sometimes expensive cost, they’re not likely to be getting insurance coverage anytime soon. And unfortunately it will be too late once they have a breach.
By using Trava, you can implement ongoing cyber risk management at your agency around the clock. And with our risk assessment tool, you can help your clients understand the health of their cybersecurity. With the ability to develop a comprehensive program using Trava, you can better safeguard your clients from cyber risks and provide them peace of mind. Trava gives your clients a 365-day view of their cyber security infrastructure, which means better cybersecurity management and easily manageable accounts. Visit our website today for more information on how Trava can help your clients.