The news is full of cyber liability and data breach stories. The best known may have occurred in 2011 when SONY’s Playstation Network was hacked and some 70 million users names, physical and email addresses, birthdates, and credit card numbers were stolen. SONY quickly took the system offline to reinforce it, but within days of coming back on line, hackers broke in again. The FBI believes that similar intrusions are happening to corporate networks, personal computers and government systems by the thousands every single day.
Business owners who use a personal computer or do any business on the internet (web sites, point of sale systems, etc) have this exposure. Customers names, credit card information, social security numbers, confidential health information and drivers license numbers can all be stolen by hackers. Data stored on a laptop can be easily accessed if the laptop is stolen or left somewhere unwittingly. Your employees who log on to the internet using a wi fi location can expose your corporate data since most wi fi locations are not protected. The list goes on and on.
Many small business owners don’t think it can happen to them. They feel they are too far under a hacker’s radar screen. Criminals are now targeting small businesses because they know that many businesses don’t have large IT departments or invest in IT security.
According to the experts, the average cost to an organization of a compromised record is around $200. Data needs to get restored, clients need to be notified, and your company’s reputation needs to be repaired. If you multiply $200 by the number of records/clients you have, the expense can be staggering.
So, what to do? First, start with basic risk control techniques. Invest in data base and computer security. Harden passwords. Put limits on where employees can access your network and when. Have an IT professional audit your company’s ability to protect your client’s data.
Another step is to consider buying Cyber Liability Insurance. Many of the large well- known commercial carriers have started offering these policies on a stand alone basis. One carrier has even started offering the coverage as an endorsement to their business owners policy which typically wraps general liability and property insurance all together in one policy.
Most policies protect your first and third party risks. First party risks are those a company bears outright, such as the cost to notify customers of a breach, your lost business income as a result of a breach, the cost to repair your companies reputation, the cost to recreate any lost data, etc. Third party costs are those that you are legally liable for as a result of your failure to protect clients against a breach. Lawsuits from clients can include their cost of credit monitoring services, their loss of privacy, libel, slander, etc.
The premiums and limits these carriers offer are broad and diverse. Adding $100,000 of coverage onto an existing business owners policy can cost as little as $250. Buying a stand alone policy with $1,000,000 of coverage can run from $1,500 to $10,000 depending on how much exposure you have. Carriers can offer higher limits of $25 million to $300 million and price the coverage accordingly. The best action is to start talking with your insurance agent and see what would fit you the best.