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The Benefits of Getting Cyber Insurance for Your Business

The Benefits of Getting Cyber Insurance for Your Business

Small businesses are at great risk of cybercrime. So put your priority where your privacy policy is and read this article to learn how to protect yourself.

27th March 2019

It takes time, effort and resources to build a brand. But a cyber attack can put this and your reputation at risk if effective measures aren’t in place. This is the first of two articles discussing how businesses can place such measures. Part two explains How to Protect Your Business From a Data Breach.

This article outlines cyber crime’s challenges to small businesses, who should, as a result, consider a cyber insurance policy to protect its obligations and finances.

What’s The Point of Cyber Insurance?

The Financial Burden of Cyber Crimes

Big businesses, such as Target, Sony and Adobe have had their profits and consumer trust damaged by cyber attacks. But what about smaller businesses?

Small businesses make up 43% of all cyber crimes because they can’t afford to invest in security, making them easy targets. However, they can’t afford to recover from an attack either.

In 2017, the costs of recovering from a widespread phishing attack forced the closure of 22% of small businesses in Australia.

Learn more in 4 Ways To Protect Your Online Business From Phishing.

Small businesses need cheaper alternatives than investing in security or recovering from an attack. Otherwise, they’ll continue to close down from the financial burden of cyber crimes.

Businesses Have Obligations

Businesses have obligations under the Privacy Act 1988 (Cth), including transparency in collecting and storing information. Failing to meet an obligation can mean paying a penalty.

Privacy policies provide transparency. They inform consumers of how their data will be collected, stored and used. Thus, a user’s consent to a privacy policy forms a relationship of trust.

A cyber attack can harm this relationship and penalise a business for not protecting user data. Bigger businesses can survive this, but smaller businesses are at more risk.

How Can Cyber Insurance Help?

Generally, cyber insurance covers losses from data breaches. However, policies can provide an incentive to implement security measures by way of reducing premiums.

Ideally, a comprehensive plan is desirable. But the cost of full coverage is too much for a small business. The high cost is due to the high financial risk of data breaches, although insurance companies have sought to accomodate small businesses by offering cheaper plans that exclude certain liabilities.

In effect, an insurance policy can be tailored to meet your business’ needs at the cost of less coverage. Therefore, you need to understand what’s covered by your cyber insurance policy and what isn’t. And you need to determine whether incurring extra costs are worth larger coverage.

Final Thoughts

It’s up to you to weigh up the costs of a cyber insurance policy against the possible losses of a data breach. Your business may be too valuable to risk the costs, penalites and breaches of trust associated with cyber attacks.

The key to keeping consumer trust in a brand is to be transparent and to back up words with action. Your privacy policy outlines your obligations to your customers, so it’s important to reflect those obligations in your conduct.

Cyber insurance is the most effective way to secure the longevity of your business, but it’s not the only way.

Part two of this series discusses How to Protect Your Business From a Data Breach.

Unsure where to start? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from  Australia’s largest legal marketplace.

Author
Shaheen Hoosen

Shaheen is a Legal Tech Intern at Lawpath as part of the Content Team. He is in his final year of a Bachelor of Laws with the degree of Bachelor of Information Technology (Major in Information Systems and Business Analysis) at Macquarie University. He is interested in IT Law and Access to Justice.