The Benefits of Business Cyber Risk Insurance

In today's digital world, cyber incidents have unfortunately become a significant risk for businesses. This includes everything from cybercrime to malware, data breaches and hefty fines. While it may seem like something that only affects big corporations, the truth is that cybercriminals target companies of all sizes.

Despite this growing threat, many smaller businesses in the UK remain unaware of cyber risk insurance. This guide aims to shed light on why protecting your company is essential and what this type of business insurance policy has to offer.

Who Needs Cybersecurity Insurance for Small Business?

You might think your company is too small to be of any interest to cybercriminals, but that's a dangerous misconception. Studies show that cybercriminals are three times more likely to target SMEs than larger businesses, with around 96% of all cyberattacks aimed at SME.

Unlike large enterprises, SMEs often run on tight margins, meaning cybersecurity investments aren’t usually top priority. This makes them a vulnerable target.

A good cyber policy offers access to specialised cybersecurity professionals, which can be invaluable when it comes to withstanding and recovering from attacks.

Why Your Business Needs Cyber Risk Insurance

A cyberattack can be devastating, impacting your finances, operations and reputation. Here are eight reasons why your business should consider this protection:

1. Cybercriminals Actively Target Small Businesses: Don't be fooled into thinking you're immune to attack. Cybercriminals know SMEs have weaker defences.

2. Many SMEs are Powerless: Without robust cybersecurity systems, you might find yourself with no choice but to pay up if hit by a ransomware attack.

3. Cyber Threats are Getting Harder to Spot: Phishing emails, a common form of attack, are becoming incredibly sophisticated. Cybercriminals are even using AI to create more realistic messages.

4. Cybercrime Carries a Huge Cost: The average cost of a single security breach for British businesses ranges from £1,100 to £4,960.

5. Cybercrime is Becoming More Expensive: The global average cost of a data breach in 2024 hit a record high of $4.88 million, a 10% increase year-on-year.

6. A Breach Will Cost You More Than You Think: Beyond the immediate financial hit, a cyber breach can severely damage your business's reputation. Additionally, if it's found that you didn't take sufficient measures to secure data, you may face GDPR fines.

7. SMEs Can Feel the Impact for Years: While some businesses recover quickly, severe attacks can lead to years of rebuilding systems.

8. Cyber Insurance Can Determine How Your Business Recovers: While cyber insurance won't stop attacks, it ensures you have the resources to respond effectively.

The Benefits of Cyber Security Insurance

Cyber insurance offers reliable protection against the cost of an attack, significantly reducing your risk exposure. A comprehensive cyber policy includes:

• First-Party Coverage: This coverage pays for the costs of investigating and recovering from a cyber incident, data breach or privacy violation. Think data recovery, forensic analysis and restoring your systems.

• Third-Party Coverage: This protects you against claims made by third parties, including legal fees, resulting from a cyber incident.

Beyond financial protection, cyber insurance often provides access to a suite of services you can deploy immediately after an attack to mitigate its impact. These can include support with:

• Breach Response: Getting expert help when you need it most.

• Business Interruption: Covering lost revenue and associated expenses during downtime.

• Specialised Forensics: Identifying the cause and extent of the breach.

• Public Relations: Managing your company's reputation during a crisis.

• Call Centres: Helping you handle customer enquiries and concerns.

Despite these clear benefits, only a small percentage of British SMEs have adopted cyber insurance. They are much less likely to be insured than medium or large businesses, and even less likely to review the risks posed by their immediate suppliers. You can read more about this in our article on SME cyber insurance.

How Much Does Cybersecurity Insurance Cost?

Compared to the potential cost of a cyber breach, cyber insurance is a cost-effective option for many businesses. However, the price depends on your company's unique risk profile. Factors that influence this cost include:

• Size: Bigger businesses often have more data and systems to protect.

• Data Held: Handling more sensitive data increases risk.

• Measures in Place: Implementing security measures can reduce your premium.

• Details: Tailoring your policy to your exact needs.

Minimising the Cost of Your Cyber Insurance

You can proactively manage risk and potentially reduce your cyber insurance costs by taking these steps. Preparing for a cyberattack doesn't have to be complicated.

Research indicates that approximately 97% of cyberattacks could have been prevented by implementing basic, often free, cybersecurity practices. Here are some key strategies:

• Implement MFA: Use Multi-Factor Authentication for remote access.

• Create Backups: Store these offline or protect them with MFA.

• Regular Patching: Apply critical patches within 72 hours.

• Conduct Training: Ensure your team is aware of common threats.

What Kind of Cyber Coverage Does My Small Business Need?

Your cyber insurance coverage can be fully customised to your company’s circumstances. While fundamentals like first-party coverage are standard, several factors play an important role in tailoring your policy:

• Potential Exposure: Start by reviewing your cyber risk assessment. This identifies vulnerabilities in your online presence, as well as in your hardware and software.

• Stored Data: If your business handles sensitive client data, your policy may include services such as identity protection.

• Data Access: The number of people with access to sensitive data and the types of access controls you have in place will affect your premium.

• Revenue: Your total annual revenue will impact your premium and help establish the scale of potential impact to your business.

• Industry: Different sectors face different threats and compliance requirements.

Every small business can benefit from incorporating cyber insurance into a comprehensive cybersecurity plan. Don't fall into the trap of thinking you're immune to cyber threats. With the right cyber insurance policy, you can have the peace of mind that you'll be able to bounce back from a data breach.