Online businesses share many of the same risks as brick-and-mortar organizations. However, because their operations are performed primarily online, their risk of encountering cyber attacks is significantly higher making smaller businesses especially vulnerable to such attacks.
Data shows that 50% of small to medium-sized businesses have been the victims of cyberattacks, and approximately 60% of these companies go out of business.
While it’s not possible to completely eliminate these risks, in Hawaiʻi, you can reduce the likelihood of a cyber attack by carrying small business insurance.
Cyberattacks: What are They and How Do They Work?
Cyberattacks refer to online assaults that are launched by cybercriminals who may be located anywhere in the world. Using one or more computers, cybercriminals can maliciously steal data, disable computers, or use breached computer systems as a designated launch point for additional cyberattacks.
There are many ways that cybercriminals can perform a cyberattack, but some of the most common include:
- Malware – A malware attack involves the use of ransomware, spyware, worms, or viruses. Malware breaches are generally successful when there is a gap in security, such as when an employee clicks on a dangerous email link.
- Phishing – This is the practice of sending to unsuspecting individuals, fraudulent communications that appear to be from a reputable source. Once a cybercriminal breaches the network, they can steal sensitive information or install malware on the victim’s computer.
- Denial-of-Service Attack – Denial-of-service attacks essentially flood servers, systems, or networks with a large volume of traffic to exhaust bandwidth and resources. This practice makes the system unable to fulfill legitimate requests.
- Man-in-the-Middle Attack – A MitM attack occurs when a cybercriminal gets involved in a two-way transaction. After interrupting the traffic, they are able to filter and steal sensitive data.
- SQL Injection – Structured query language (SQL) injections occur when cybercriminals insert malicious code into servers that use SQL, forcing the servers to reveal sensitive information.
How Can Cyber Insurance Protect Online Businesses?
From sole proprietorships to large corporations, businesses of all sizes face cyber risks. Cyber insurance is an essential insurance policy that all businesses can carry to protect against the fallout of data breaches and other cybersecurity issues.
When it comes to cyberattacks, it’s not a question of if your online business will suffer a breach, but rather when. A cyber liability policy is designed to help organizations cover the costs associated with cyberattacks, such as lost income.
It may also cover the cost of notifying clients or customers impacted by the breach, as well as any expenses that accumulate when recovering compromised data or repairing damaged computer systems. Coverage options are also available to address the following:
- Cyber extortion
- Crisis management expenses
- Forensic investigations
- Regulatory defense fines
- Betterment
- Litigation expenses
- Business interruption
When shopping for cyber liability insurance, carefully review the policy for exclusions. Items generally not covered under these policies include intentional acts, business interruption from systems that are under the control of third parties, and prior acts or knowledge of claims before coverage started.
What Should I Look for in a Cyber Insurance Policy?
Today, cyber liability insurance is an essential policy for any business that works partially or entirely online. However, not all policies offer the same terms and coverage options. When comparing cyber insurance policies, consider the following elements:
1. Forensic Costs
If your business data is compromised, you may need to investigate how it happened. A strong cyber insurance policy will cover the costs of hiring a third-party forensic team.
2. Legal Expenses
Data breaches can result in claims against the business for theft or loss of sensitive customer data. You’ll need a policy to cover the costs of legal counsel to defend you if you are sued.
3. Customer Notification
Notifying clients or customers of a cyber breach is of the utmost importance after a cyber event. In Hawaiʻi, and all states, this notification process is mandatory. Cyber insurance will usually cover the cost of these communications.
4. Regulatory Penalties & Fines
Organizations impacted by a cyber event in which client or customer data was exposed may likely encounter state or federal penalties and fines. Many policies will cover these expenses.
5. Credit Monitoring
Businesses are often obligated to provide victims of cyberattacks with credit monitoring or identity theft repair services. Cyber liability insurance may cover the cost of these services.
Trust the Experts at Atlas to Provide a Customized Policy
Cyberattacks can have devastating effects for online businesses. Consequences can range from stolen funds and lost productivity to angry customers and a hit to your brand’s reputation.
In Hawaiʻi, the team of local insurance experts at Atlas Insurance can help secure your business against cyber liability threats. For over 90 years, we’ve been helping to protect local businesses. Contact us at (808) 400-6634 to get started.