Why Your Business Needs Cyber Insurance
September 14, 2016
48 percent of people traded their passwords for candy from strangers – why cyber insurance is for business big and small.
Have you heard about this study from the University of Luxembourg? A pair of psychologists from the school—armed with nothing more than University of Luxembourg bags and a large supply of chocolates—convinced nearly half of those who received the candy to turn over their personal passwords.
The psychologists did so to study what effects that giving a small gift—in this case, the chocolate—would have on achieving compliance. Gift-giving is one tactic that falls under the umbrella term “social engineering,” and it’s a tool that has been gaining more popularity among hackers.
How to make cyber risk resonate.
Cyber insurance has been a difficult coverage to sell for numerous reasons—carriers have been scrambling to craft appropriate policies, the exposures are difficult to understand and premiums have been high, especially for small- to mid-sized businesses. However, according to Travelers, 62 percent of cyber breach victims are small- to mid-size businesses.
Industry forecasts are all saying the same thing—cyber-attacks are becoming more and more common, and not just for large businesses. That means that now could be perfect time for your prospects to buy cyber insurance. Let’s break it down further.
Cyber-attacks are rampant and costly.
IBM, the Ponemon Institute and Verizon Communications have some staggering stats for us that clients and prospects need to know as well:
2 million cyber-attacks on businesses occur every week
62 percent of all data breaches occur in small- to medium-size businesses
100,000 customer records are affected in an average cyber-attack
$300,000: average total cost of a data breach
Cyber threats are in the news—and on your clients’ minds.
Data breaches have been big news. Target, Anthem and Sony have all been recent victims of data breaches, so your clients know that the threat is real and potentially costly.
It’s a buyer’s market for cyber coverage.
According to a report from Willis, Marketplace Realities 2016: Bringing the Pieces Together, 2016 is going to see flat to modest premium increases for renewals and competitive market conditions for first-time buyers.
The Cyber insurance market is expect to triple by 2020.
Annual gross written premiums will grow from around $2.5 billion today to $7.5 billion by the end of the decade, according to recent projections. In other words, the cyber insurance market is expected to triple in capacity in less than 5 years!
Bottom line: You should position yourself as a trusted advisor in this emerging, uncertain market. Every client who has a website or stores electronic data can be vulnerable to a data breach. Unfortunately, 75 percent of those data breaches go undetected for weeks or months, allowing damages and costs to escalate (Verizon Data Breach Report).
The risk is there for every organization no matter the size or industry. Break through the buyer’s resistance by educating yourself on cyber insurance itself as well as common pain points—“Legal or IT says we don’t need it,” or “It’s our point-of-sale vendor’s liability,” or “It’s unaffordable.” You need to ensure they understand beyond this. Talk about exposure control programs with your prospects and clients, starting with a cyber exposure scorecard to assess the risk and offer a cyber security planning guide.
It’s not a question of “if” anymore in small- to mid-sized businesses—it’s “when.”