Cybersecurity Insurance: What you need to know
Cybersecurity insurance transfers some of the financial risk of a security breach to the insurer. But it doesn’t do a good job of covering the reputation damage and business downturn that can be triggered by a security breach.
In fact, 93 percent of small and midsize enterprises (SMEs) that have experienced a cyber incident reported a severe impact to their business. Almost all reported a loss of money and savings. Thirty-one percent reported damage to their reputation, leading to a loss of clients, as well as difficulty attracting new employees and winning new business. And nearly half reported an interruption in service that damaged their ability to operate. In spite of those figures, less than 3 percent have cyber insurance
What Is the Domino Effect?
Cybersecurity risks are uniquely challenging for small businesses due to the frequency with which these threats manifest into bona fide cybersecurity incidents, the severe business disruption and financial impacts they can have, and the limited resources that small businesses typically have at their disposal to respond and recover from an incident. This cascade can easily lead to bankruptcy due to a phenomenon we’ll call “The Domino Effect.”
Significantly more than half of all cyberattacks are directed at SMEs, and that number is steadily increasing.
Why Are SMEs Targeted?
Given the all-too-common outcomes above, the logical question to ask is: Why don’t SMEs do more to protect themselves with professional cybersecurity measures? There are two common reasons why they don’t.