Kaspersky Labs, an antivirus software and Internet service provider company, found that the average data breach can set small businesses back $120,000 in recovery costs. Considering how much more integrated technology and business are becoming, it’s imperative that IT security be worked into your startup’s budget.
Think a breach won’t happen to you? Think again.
According to Wombat’s 2018 State of the Phish report, more than 76 percent of organizations surveyed reported phishing attacks in 2017. Today, most businesses are tied to technology in one way or another, leaving them vulnerable to cyberattacks. Simon Campbell-Young, CEO of MyCybercare, said that “All businesses are targets for hackers, not just the large corporates.”
To deal with the increasing threat of cyberattacks, more and more businesses have begun turning to cyber insurance. Between 2011 and 2015, the share of companies considering purchasing cyber liability insurance rose from 24 percent to 64 percent. Traditional commercial liability policies typically exclude (or don’t specifically define) internet-based risks. For a small businesses and startups, cyber insurance can cost anywhere between $750 and $8,000.
If you’re worried about the cybersecurity of your startup, here are five ways this type of insurance can help:
Receive free credit monitoring
If your customers are impacted by a data breach, most cyber insurances will monitor your customers’ credit to ensure their information isn’t used illegally. This is absolutely crucial, as doing so without an insurance company handling this for you is a severe headache.
Research by Experian Data Breach Resolution shows that 58 percent of consumers “want companies to step up after a breach and provide identity theft protection and credit monitoring.”
Doing so can be a big step toward winning back customer trust and contributes to customer retention. Check with the specific insurance provider to make sure this service is included. If it isn’t, we’d recommend looking elsewhere, as this is a relatively common service.
Legal costs coverage
Legal costs can quickly pile up if customers decide to sue your business in the event of a data breach. Most cyber insurance policies will reimburse your legal expenses, which could include lawyer fees and settlements. If you’re a startup, these fees may be well beyond your budget, and having insurance can be a life saver.
In addition, most insurers provide consultants and experts to help you navigate various rules and regulations in the event of a breach. A breach would likely trigger a number of legal requirements, and it’s much easier to navigate with an expert to guide you.
Insurance is a preferable way to deal with these costs over a loan—which can come with interest rates as high as 71 percent, if you have less than stellar credit.
Repair your name with a PR expert
A big, intangible cost of a breach could result in damage to your brand and name. Insurers will typically hire a professional PR team to get ahead of the damage and preserve your reputation. It doesn’t matter if your business is large or small, old or new—damage to your reputation is extremely costly.
Repairing your reputation is something that PR experts work on daily, and considering how costly something like this can be, it’s best to leave it to professionals.
Recover lost income
If your business takes a pause as a result of a data breach, your company could be due the income that it would’ve generated in that time. Of course, there are a number of conditions attached to this clause, but this is a benefit that most business owners would be hard-pressed to simply give up.
As a startup, this can be especially important, as many businesses rely heavily on cash flow and don’t have large cash reserves. A pause of a few months can be fatal to many startups, and having a recovery measure in place could mean the difference between closing up shop and continuing to operate.
Investigate the issue
Insurers will also dispatch IT professionals to help identify the source of the issue. An IT forensics team would detail the complete scope of the breach and also figure out what safeguards need to be put in place to prevent another breach from happening in the future.
In addition, you’ll receive consulting from professionals on the preventative measures you should take. Depending on the policy, you may receive coaching on IT security best practices. Don’t expect this coaching to be a comprehensive security solution, but you might learn a best practice or two about securing your data.
If you think your business would never use this insurance, just be aware that it takes business an average of 206 days to figure out that they’ve been breached in the first place. If you consider the amount of damage hackers can do within 206 days, it should definitely be a cause for concern. Keep in mind that most insurance policies won’t pay a cent for any breaches that were found to have taken place before the policy became active.