The number of cyberattacks on small Australian businesses is increasing at an alarming rate.
Just last year, almost half of Aussie businesses were hit by a cyberattack losing on average four days of productivity!
Some companies might be able to survive a cyber incident, but the truth is that 60% of small Australian businesses go bankrupt within six months of a cyberattack.
So, to help protect your business against the impact of cybersecurity threats, you may need to invest in cyber insurance.
Along with preventative cybersecurity measures, cyber insurance is one of the best ways to ensure your business doesn’t go bankrupt in the event of a cyber incident.
In this short guide, we’ll review what cyber liability insurance is and what it covers. And we’ll also go over the main reasons why you should invest in cyber insurance.
What Is Cyber Liability Insurance?
Cyber liability insurance is designed to protect companies from risks pertaining to information technology activities and infrastructure. It’s typically used as a holistic risk response tool to help businesses respond to a claim but also prevent cyber incidents from happening in the first place.
How Does Cyber Liability Insurance Work?
Cyber liability insurance usually includes three areas:
- Response: With the right cyber liability insurance, you’ll have access to a 24/7 emergency response team that can respond to a cyber incident immediately and prevent things from escalating.
- Recovery: The recovery section of your cyber liability insurance will cover you financially for your data recovery and business interruption costs. And you’ll also be covered in case you’re liable for third-party damages.
- Prevention: To mitigate their losses, insurers understand they need to help businesses protect themselves as best as possible. That’s why insurers will also help you understand the cyber threats your business might be exposed to and advise you on the best cybersecurity measures to implement.
What Does Cyber Liability Insurance Cover?
When a company is affected by a cyberattack, the business interruption costs can quickly escalate. In fact, business interruption is the main cost for many businesses during a cyber incident, with 33% of companies reporting paying between $100,000 and $500,000 due to system downtime.
Cyber insurance can cover your business financially for any business interruption costs directly incurred by the attack.
Electronic theft or cybertheft occurs when a cybercriminal obtains a person or business’ financial data on the faith of fraudulent communication and illegally transfers funds from one account to another.
80% of Australian companies were hit by a cyberattack in 2021. So, if you haven’t been targeted yet, you might very well be in the near future! Cyber insurance covers you financially for ransom payments and the costs of hiring a negotiator.
If a data breach occurs, the reputational damage to your business could be significant. For instance, the recent Optus data breach not only cost the business millions in data recovery but also saw thousands of customers join the competition due to a lack of trust.
Trust is one of your most valuable assets as a business owner. The good news is that cyber insurance can help mitigate the consequences of a cyber attack on your reputation by providing incident management tools and public affairs consultants.
This typically covers the cost of paying an informant who provided information about the cybercriminals who orchestrated the ransomware attack.
Cyber insurance will protect you from third-party claims if a system failure results in unauthorised access to sensitive data or information.
Cyber liability insurance will cover your business for any legal costs incurred while defending claims.
What Does Cyber Liability Insurance Not Cover?
While cyber insurance will protect your business against many cyber security risks, it’s important to be aware of the areas that aren’t covered by cyber insurance.
Cyber liability insurance won’t cover the costs of upgrading your cybersecurity, including your systems or networks following a cyberattack.
Cyber incidents can lead to physical property damage (hardware, etc.). Unfortunately, this isn’t something cyber insurance policies typically cover.
If your business is affected by a physical event such as a storm or fire, the costs incurred by any outage or power disruptions will be your responsibility.
Why Should You Invest In Cyber Liability Insurance Cover?
You worked hard to be where you are today. But the truth is that in less than a minute, a malicious attack could destroy your hard work.
While implementing preventative security measures such as training your staff, setting up firewalls, encrypting information, and keeping your systems and networks up to date is a great way to reduce cyber risks, cybercriminals are increasingly sophisticated. And this means that they could still gain access to your systems and networks.
And as discussed in this post, this could, in turn, cost you a fortune, not to mention the reputational damage in the event of a data breach.
That’s why cyber insurance is so critical.
Unfortunately, 33% of businesses with fewer than 100 employees don’t proactively invest time, money, and efforts to prevent cyber security breaches. What’s more, 87% of small businesses think that their company is cyber-safe because they use antivirus software.
At upcover we believe that cyber insurance is a key element of any effective cybersecurity risk management plan. And we know how exposed small Aussie businesses are.
That’s why we’ve recently launched a cyber liability insurance policy tailored to small Australian businesses.
Our policy covers the following areas:
- Cyber incident response
- Cyber extortion
- Data and application restoration costs
- Cyber crime
- Business interruption
If you’d like to discuss your cybersecurity needs and how we can help, don’t hesitate to get in touch! And if you’re looking for more information on cyber threats and how to protect your business with preventative measures, check our blog section.
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