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Cybersecurity for Small Businesses: 6 Problems that Cyber Liability Insurance Can Solve

Contributor: Allison Wojcik, Commercial Specialist

March 1st, 2024 | 5 min. read

By Tony Calavitta

Cybersecurity for Small Businesses: 6 Problems that Cyber Liability Insurance Can Solve

You’ve likely heard this story over and over again:

First, an innocent click opens a suspicious email with a convincing attachment. Then, an unsuspecting download leaves the digital door cracked, company data now vulnerable to a malicious cyber incident. Finally, a cyberattack inflicts irreparable financial and reputational harm to the company in question.

That’s all it takes to collapse a successful small business in today’s interconnected age where valuable, sensitive, even high-risk information is stored – and can be stolen – online.

But does the story have to end this way though?  No.

With Cyber Liability Insurance you can change this narrative completely, making sure that an inadvertent error does not send your business into a downward spiral.

So, why then, do only 55% of businesses carry Cyber Liability Insurance? Considering that cyber insurance claims have more than doubled since 2021, the need for and importance of Cyber Liability Insurance, especially among small businesses, has never been greater.

With that in mind, the goal of this article is to show you exactly why!

By reading to the end, you’ll learn 6 common cybersecurity problems that small businesses experience and how Cyber Liability Insurance can effectively solve all of them.

What is Cyber Liability Insurance?

Cyber Liability Insurance is a specialized form of business coverage designed to counter digital threats and safeguard businesses from the financial losses that come with cyber incidents.

To learn more about this type of insurance, check out our article, What is Cyber Liability Insurance?

Cyber Liability Insurance: The simple solution to 6 common cybersecurity problems

With cyber threats escalating in both frequency and sophistication, safeguarding your small business's online presence is no longer a luxury but an absolute necessity.

Here’s the good news:

In this increasingly complex digital landscape, Cyber Liability Insurance is a solution to many of the cybersecurity challenges small businesses face.

Let's examine 6 of these common problems and how Cyber Liability Insurance provides effective solutions to them.

The change challenge: Constantly evolving digital threats

In today's fast-paced digital world, small businesses are under increasing pressure to keep up with technological advancements. However, this charge toward digital transformation, while necessary, creates a double-edged sword.

As small businesses integrate new technologies, they encounter a rapidly evolving and increasingly complex cyber threat landscape. Unfortunately, their cybersecurity defenses often struggle to keep pace with this rapid evolution, leaving them vulnerable to cyberattacks. This gap between digital defenses and cyber threats creates a significant risk for small businesses, potentially jeopardizing their data, operations, and ultimately, their success.

The solution:

Cyber Liability Insurance is able to bridge this gap by offering small businesses access to a network of cybersecurity professionals.

These experts don’t just react to incidents; they proactively improve a small business's security posture through risk assessments, implementation of best practices, and employee training sessions. This access is akin to having an elite cybersecurity team on call, leveling the playing field for small businesses dealing in the digital domain.

The expertise enigma: In-house staff skill gaps

The complexity of cybersecurity demands specialized knowledge – a requirement that is critical but can be challenging for small businesses that do not have the resources to staff an in-house cybersecurity expert. This gap in cybersecurity expertise leaves them vulnerable, not only to the more common phishing attacks but also to sophisticated threats that require nuanced defenses.

The solution:

Cyber Liability Insurance not only provides financial coverage but also offers crucial educational resources.

Through a Cyber Liability Insurance provider, small businesses can gain the insights and tools necessary to foster a culture of cybersecurity awareness. This collaboration extends from strategic planning for digital resilience to incident response, effectively turning the expertise issue into an opportunity for growth.

The collaboration constraint: Partner policy requirements

When small businesses look to partner with larger corporations, they often encounter a new hurdle – the requirement to carry Cyber Liability Insurance. This requirement, aimed at safeguarding the larger business’s interests, can initially seem like a barrier to entry for small businesses trying to scale their operations and enter new markets.

The solution:

However, securing Cyber Liability Insurance means more than just compliance – it not only fulfills this insurance requirement but also underscores a small business’s commitment to data protection and cybersecurity.

This commitment satisfies the partnership criteria and enhances the small business's credibility and trustworthiness, paving the way for stronger, more secure business relationships.

The compliance charge: Data protection laws with penalties

In response to data breaches regularly making headlines, regulatory bodies have tightened data protection laws and imposed strict compliance requirements with hefty violation penalties. Small businesses, often limited by resources, may find navigating these regulations difficult and, rather than ensure compliance with them, risk the possibility of these associated fines.

The solution:

Cyber Liability Insurance can play a pivotal role in achieving compliance by offering coverage plans that include both compliance assistance and penalty mitigation.

This supplemental support can be invaluable, enabling small businesses to not only adhere to complex regulations more easily but also without the overwhelming fear of financial distress due to noncompliance.

The fiscal fallout: Crippling financial impact of cyberattacks

The financial impact of a cyber incident extends far beyond the initial breach, affecting various facets of a business's operations and financial health.

For many small businesses, the immediate aftermath involves not only a break in daily operations but also the onset of a complex series of recovery efforts. These efforts can incur substantial costs, including those for forensic investigations to determine the breach's extent, repairs to compromised systems, and measures to restore lost data. These direct costs, however, are just the tip of the iceberg.

In the long run, businesses can also encounter an array of indirect costs and financial liabilities. For instance, legal battles can emerge when those affected seek compensation, while regulatory fines may be levied if an incident was the result of noncompliance with data protection laws.

The cumulative effect of these expenses and losses can threaten the very survival of a small business that may not have the financial resilience to weather such a storm.

The solution:

In this context, Cyber Liability Insurance can be a much-needed lifeline, offering a versatile financial safety net designed to address both the immediate and long-term financial challenges posed by cyber incidents.

Cyber Liability Insurance coverage is meticulously structured to cover a wide range of expenses so that small businesses can respond to and recover from cyber incidents effectively. This includes costs associated with data recovery efforts, legal defense fees, regulatory fines, and more.

Perhaps most importantly, Cyber Liability Insurance supports the sustainability of business operations both during and after a cyber incident. By offering coverage to mitigate the loss of income during affected periods of disruption, this type of insurance helps small businesses to both survive a cyberattack and maintain continued operational integrity following a covered incident.

Therefore, the value of Cyber Liability Insurance transcends the simple mitigation of losses – it represents a comprehensive safeguard, providing immediate and long-term financial resilience.

The credibility crisis: Reputation damage from data breaches

Beyond financial losses, the intangible cost of lost trust and a damaged reputation can be detrimental, sometimes causing irreparable harm, to a business’s stability. And, in today’s tech-driven world where news spreads fast, rebuilding customer confidence after a data breach can be a slow, painstaking process that many small businesses may struggle to overcome.

The solution:

Cyber Liability Insurance addresses this issue by covering public relations efforts and post-incident crisis management.

This assistance is crucial, allowing businesses to thoughtfully address any immediate fallout and to strategize a smart recovery process. It can be instrumental in mitigating the lasting effects of reputational damage, helping businesses bounce back from a cyber incident quickly and effectively.

Are you prepared for a cyber incident? You can be!

You know it now:

Cyber Liability Insurance isn't just nice to have – it's a one-stop solution for businesses looking to ramp up their digital security, make cyber threats more manageable, and avoid common issues that come with operations in an increasingly internet-based era.

And we know how to help:

Here at Combined, we have helped countless employers put the right Cyber Liability Insurance policy in place to effectively protect their business from digital dangers.

Our team of experienced commercial insurance specialists can help you make sure that your business is covered too.

Don't wait for a digital disaster to strike!

Partner with Combined to get the cyber coverage you need and the peace of mind you deserve.

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This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.