The digital revolution has paved the way for e-commerce websites to thrive. Geographical limitations no longer restrict businesses, as customers can be found across various states. Furthermore, transactions can now be completed within minutes instead of days, thanks to efficient, easy to use payment processing and online sales platforms. Launching an e-commerce store is now as simple as purchasing a website domain and integrating a sales platform.
But it’s in the midst of these perks that we see the increase in cyber issues. If your client is operating an e-business, here are ways insurance agents can help business owners enhance their cybersecurity.
How Cyber Attacks Occur
Over the years, cybersecurity has become a top concern for businesses — large and small. That’s because a cyber attack has the potential of costing the organization an estimated $3 million dollars.
What’s more, about 60% of small businesses close once they’ve become a victim to a cyber attack. How do these cyber attacks even happen? What should small businesses be on the lookout for? Cyber attacks occur most commonly in the form of:
- Phishing: With this form of cyber attack, an outside source impersonates a company and tries to elicit confidential data. This can occur over the phone, via text messages, or email.
- Malware: Malware is a specific type of software that is designed to infiltrate a company’s internal system and even disrupt it.
- Ransomware: Ransomware is a type of malware in which a company’s data is locked away and encrypted to deny access to the original owners. The data is released upon the cyber attacker receiving a payment.
The Consequences of a Cyber Attack
Because of the swift nature of the cyber attack, the consequences become readily apparent. Business operations halt to a stop and their ability to recover depends heavily on whether or not they have a plan in place. In addition, the following can occur:
- Infected Devices: If the cyber attack comes in the form of a virus, then it has the potential to infect many devices in a short span of time. For example, if a virus comes in the form of an easily downloadable file, and this file is attached to emails, then the number of infected devices (e.g. computers) increases.
- Loss of Business Revenue: E-commerce stores experience the potential loss of revenue anytime their website is down. Depending on the specific sales trends of that given company, this loss in revenue can be hundreds to thousands of dollars a day.
- Reputational Damage: When customers’ confidential information is stolen (such as their credit card or social security number) then the company is held responsible. It’s very unlikely that those customers who became victims to a cyber attack will continue to become patrons of the business.
Safety Precautions to Safeguard Data
Despite their frequency, the majority of cyber attacks are preventable. Here’s advice that insurance agents can pass on to the business owners.
- Remain alert: Know the list of people who have authorized access to your company’s data. When an email or a phone call comes from an outside source, and that source asks for confidential information, refrain from giving out the information. Ask for credentials instead.
- Communicate: If you’ve received a suspicious email requesting confidential information, communicate this with your internal team so that they can be on the lookout also.
- Set-up 2 Factor authentication: Sophisticated algorithms have the ability to guess passwords. However, it’s very difficult for algorithms to bypass a 2 factor authentication.
The Importance of Cyber Insurance
Even with best practices in place, cyber attacks can still happen. One essential precaution that e-business owners can implement immediately is putting a cyber insurance plan in place.
Here’s what cyber insurance can cover for your client’s business:
- Coverage for Data Breaches: With a data breach, the personal information of millions of people can get compromised resulting in identity theft. Customers who become victims to a cyberattack can file a claim in court. Cyber insurance will cover the costs for litigation fees and all other costs associated with identity theft.
- Coverage for Business Revenue : Cyber attacks lead to a disruption in business operations. When a company’s website is down, the company loses customers and potential revenue. Depending on the product line offered, the length of the downed system, the loss in revenue can amount to tens of thousands to even millions of dollars. Cyber insurance compensates for any losses in income that are related to a cyber attack
- Coverage for Infected Devices: Cyber attacks have the potential of unleashing a company-wide infection upon all the devices that are connected. Malware can be unknowingly downloaded via third party sites and spread from one employee to another. These devices can become corrupted and hence would need to be replaced which can cost thousands of dollars. Cyber insurance recoups the cost that goes towards replacing corrupted equipment.
- Coverage for Reputational Damage: Companies that have gone through a cyber attack are exposed to the risk of reputational damage which can in turn lead to litigation. Cyber insurance in this case, will cover the costs associated with these types of court fees so that the company can be swiftly on its way to financial recovery.
Cyber attacks are an extreme form of business technology problems and they can be extremely costly. Not all businesses have the financial resources or business insurance to recover from this type of event. As an insurance agent, you can advise e-commerce owners on the benefits of having cyber insurance policy for their business. Contact us to talk to an expert at Quaker Special Risk today. Looking to stay on top of insurance trends? Keep updated with industry news here.
