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The New Reality of Cyber Liability Risks for Small Firms


Cyber Liability Coverage An Integral Component of the Insurance MixCyber Liability Coverage An Integral Component of the Insurance Mix

While big data breaches make headlines, for every high-profile case there are dozens of threats to confidential data and information that affect everyday businesses. In a recent article in the Los Angeles Times, which highlighted examples from a list of breaches maintained by the California attorney general, it’s evident that not only are all types and size businesses exposed to hackers but also to thieves who “snatch office computers, disgruntled vendors who use purloined data to slander businesses and poach employees, and former employees who turn traitor for profit.”

One example given in the article involved an Irvine-based wealth management company, which stored backup computer drives far from the main office to ensure seamless operations in the event of a disaster. However, professional burglars hit the home where the drives were kept, cracked open a bolted-to-the-floor safe and stole the financial records of hundreds of the firm’s affluent clients: names, addresses, Social Security and driver’s license numbers, account information.

In fact, according to the National Small Business Association, many small firms know little or nothing about cyber security, even in light of the prevalence of data thefts. The trade group reported that 44% of respondents to a survey last year had been victims of at least one cyber attack, with an average $8,699.48 cost for each breach.

What’s more, the new reality is that increasingly smaller firms are more attractive for cyber criminals because they’re easier targets. Why is this?  For one thing, small business owners often leave themselves vulnerable to breaches by browsing social media or messaging friends on the same computer used to process financials. Others allow employees to log in to company networks remotely using easily stolen passwords or credentials. In addition, many don’t use anti-virus software because of cost or they feel it’s too much trouble.

Taking Action

Small businesses need to look beyond what they may think a breach would cost them when evaluating the measures that should be put in place, including the purchase of Cyber Liability insurance. There is the possibility of extensive reputational harm and for a small firm the drop in business as a result of a breach may be difficult to withstand. There is the cost to notify customers of a breach, which is regulated by state law. In addition, there is the expense of offering free credit monitoring to clients. And, there is the cost involved to determine how the breach occurred with forensics. All of this adds up and far exceeds the price of implementing strong protocols and securing insurance coverage in the event of a breach.

At Axis Insurance Services, we provide companies with Cyber Liability/Privacy & Network Security insurance coverage. A policy can be designed to provide coverage for third-party damages or settlements plus legal defense bills, in addition to forensic investigation costs, notification and remediation expenses, and even crisis management. A policy can also protect a company against the costs generated by an accidental transmission of computer viruses or other malicious code that harms another party. If the private or financial information of others is accidentally released, even if it’s not stolen or used by anyone, a firm could be responsible for remediation costs the victims incur. A Cyber policy can be designed to respond to such an event. For more information about how we can help protect you in the event of a data breach or other cyber event, give us a call at (877) 787-5258.

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Blogged on: July 18, 2014 by Mike Smith
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