We’ve all seen the scary headlines about massive data breaches and the billions of dollars that companies like Target, Neiman Marcus, Michaels, and PF Changs are paying to settle legal claims.
If you are a small business and don’t have insurance that adequately covers you for a data breach, you have very little chance of survival.
It’s easy to think that only the big companies get hit. After all, why would someone want to waste their time messing with my small business? The facts tell us otherwise. 71% of security breaches target small businesses!
28,765 records are stolen on average per data breach. That’s a staggering number, especially given the fact that most businesses breached have fewer than 100 employees.
$188 is the average cost per record stolen in a data breach. That means that the average breach costs $5.4 Million. Surely that only applies to big companies, right? Wrong. As of January 2015 the cost to Target for their breach is estimated to be over $350 million and still growing. So unless you have $5 or $6 Million in spare change sitting in your savings account, you need to consider obtaining Cyber (Database) insurance.
Database Insurance, also known as ‘Privacy and Security’ or ‘Cyber Liability’ provides coverage for risks and exposures associated with the Internet. If you collect information on your customers, or have a database of information such as names, addresses, credit cards, driver’s license numbers, social security numbers, medical information, etc., then you have what is called Personally Identifiable Information (PII). PII is the information commonly targeted by hackers.
47 states currently have some type of Privacy Law or Database Notification Law. In simple terms, these laws say that if your business loses a database of PII, your company is responsible to notify and provide restitution (a victim assistance package) for all of the individuals in your database from that state. Because each state law is different, compliance to each is very expensive and is what makes data breaches so costly.
Contact your business insurance carrier and find out more. Some policies already have this kind of coverage, but get the specifics about how much you are covered for. It’s likely nowhere near enough.
Many thanks to my friend Joe Corradetti of Leverity Insurance Group in Beachwood OH. He delivered an eye opening presentation on this subject a few weeks ago which drove me to pass it along.