Know Risk is a community education program designed by the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) to improve our understanding of insurance and how it relates to managing the many risks we all face in life.
Cyber insurance for small businesses
Don't get caught out by a hack attack.
With the rapidly increasing number of data breaches and cyber-attacks, it’s important to understand how you as a small business can protect yourself.
It is easy to think that cyber-criminals or hackers will mainly target big businesses. After all, the rewards from doing so are huge, and the recent Target US data breach highlights this.
However, research has shown that small businesses have become the main target for data breaches as most small businesses don’t have adequate security measures in place, making them a lot easier to hack into, which means criminals have much less risk.
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.
*click to enlarge the image.
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.
Cyber Insurance can help in the event of a breach
As highlighted by the Melbourne IT example, small businesses are particularly vulnerable to cyber-attacks of all kinds and can be very costly. Aside from the cost of notifying your customers, you may also face costs for PR, credit monitoring, investigations response and compliance related activity, compensation for affected customers and engaging experts.
Most of these costs aren’t covered by normal business insurance, which is why it is important to speak to your insurance provider or broker to make sure you are covered in case of a breach or attack.