Everything You Need to Know About Cyber Insurance Coverage
TLDR: Cyber insurance coverage is important for businesses, big and small. This article explores why cyber insurance is a coverage worth selling for insurance agents.
In this blog
What is Cyber Insurance Coverage?
As a specialty insurance product line, cyber insurance covers a vast range of cyber risks such as data breaches, loss, or corruption. Without a doubt, it’s an important niche for insurance agents to look into.
It’s a common misconception that small businesses don’t need cyber liability insurance coverage, but they’re exposed to risks just as much as large companies are. In fact, according to the Data Breach Investigations Report 2020, 28% of data breaches in the U.S. involved small businesses.
Let’s look at some unpleasant cybersecurity facts related to errors and omissions (E&O) claims.
- The average cost of a data breach in the U.S. is $3.86 million. – IBM Security
- There was a dramatic spike in phishing scams during the COVID-19 pandemic, from 114,702 reported cases in 2019 to a whopping 241,342 in 2020. – Internet Crime Report
- Google blocked 18 million daily malware and phishing emails related to the coronavirus in April 2020. – Google
- 64% of Americans have never checked to see if they’ve fallen victim to a data breach. – Varonis
Unfortunately, most people are unaware of the extent of the threat. If your business falls victim to cybercrime, it puts both you and your clients (and your business relations) at risk. Recently, The Washington Post reported that hackers targeted Elon Musk, Bill Gates, and other prominent figures’ Twitter pages to offer fake bitcoin deals. In the age of the internet, no one is safe from cyber-attacks.
Small Businesses Need Cyber Insurance More Than Large Businesses
If you’re intent on selling to only larger companies, you need to reconsider. While it’s apparent that all businesses need cyber insurance coverage, small businesses are more vulnerable to the risks. Most small businesses overlook the importance of targeted insurance and rely heavily on general liability insurance and cybersecurity software.
That’s often a big, existential mistake.
In a recent study by Homeland Security News Wire, 43% of small businesses were so devastated by a data breach that they were forced to shut down. Carrier Management reports that ransomware and phishing are currently the preferred forms of a data breach as they require less effort but are more profitable. Now, more than ever, there is a need for cyber security insurance.
Growth of the Cyber Insurance Market
According to Finaria, the global cyber insurance market will reach almost $10 billion in value this year and is predicted to grow by 21% each year going forward. But the state of cyber insurance policies has yet to be standardized. Policies and premiums vary significantly, from carrier to carrier. Forbes projects that by 2025, the insurance industry in general will be more standardized and sophisticated.
Most businesses mistakenly believe that their commercial general liability policy is sufficient to cover cyber liability. Moreover, cyber liability is a problem for larger companies as well as smaller ones. Cybercrime Magazine projects global cybercrime costs to grow by 15% per year, which amounts to $10.5 trillion by 2025.
Big businesses have the resources to secure themselves against cyber-attacks. Smaller companies, however, are more limited in that regard.
Insurance agents have the opportunity not just to sell cyber insurance coverage to small business owners, but also to become their trusted advisors.
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