by Joe Rosengarten
Small organizations across the United States are refraining from purchasing essential cyber coverage products. This is due to a common misconception held by smaller firms that, because they’re not operating in the big leagues, they are not going to be the target of an organized attack to capture their data or customers’ information.
The truth is that no organization is too small to be impacted by cybercrime, and smaller companies are ignoring cyber policies at their peril. Whereas a larger organization may be able to absorb the costs of a cyberattack if they’re not adequately covered, for a smaller organization the consequences could be catastrophic. “There’s a misconception that only bigger companies are targets and that cyber criminals are only interested in obtaining large volumes of credit card data or private information,” explains Jeremy Barnett, Senior Vice President of Marketing at NAS Insurance Services.
Standard CGL policies often have gaps that don’t cover cyber exposure, and although saving a couple of thousand dollars by not buying a cyber policy may seem like a smart move, organizations who do this are opening themselves up to serious exposure and financial loss. Barnett believes that brokers have an important role to play in educating smaller clients about their cyber exposure and the nature of the policies on offer. “A cyber liability policy goes much further than just protecting against a breach of customer data,” Barnett says. “Every organization, no matter the size, relies upon its network, the internet and the computers that employees use, and cyber liability policies cover all of those things, too.”
Even if an organization does not store credit card data or customer information, it is still at risk of having its computer network shut down by a virus or malware. Suddenly, that client has to halt operations, which impacts the bottom line and damages organizational reputation. “A cyber liability policy protects against business interruption; that’s the biggest risk and why companies of all sizes should be buying cyber liability policies,” Barnett says. “The policy will also help cover the costs associated with recovering the network, hiring technology experts and restoring data if it gets lost or corrupted.”
It’s not just smaller organizations that are reluctant to purchase much-needed cyber coverage: some medium and large sized companies believe that their in-house IT departments have the capability to offer guaranteed protection. These companies are underestimating the reach and sophistication of the modern cybercriminal and showing a lack of understanding around impact of third party liability and first party expenses.
Brokers have an important role to play in educating and then guiding their clients to a suitable cyber policy. In such a rapidly expanding market, brokers have a great opportunity to grow their business and become a trusted partner in the cyber segment.