Entrepreneur Magazine recently offered some answers to small-business owners who had questions about their Cyber Liability Insurance, explaining that, yes, all businesses – even small businesses – should consider this coverage.
Cyber Liability Insurance (also known as Data Breach Insurance) can cover the cost of a data breach on your clients' networks, computers, and devices. Because of the risk of breaches and high fallout cost, this insurance is becoming standard operating procedure for many small businesses.
What about your clients? That's an important question. Let's discuss what you need to know about Data Breach Insurance and how this coverage can help protect you and your clients.
How to Talk with Your Clients about Cyber Liability
As an IT business owner, you have experience explaining tech in terms a layperson will be able to understand. You'll have to do the same when you explain Cyber Liability Insurance to your clients. Here are tips to get the conversation started:
- Start with something they understand. Cyber Liability Insurance protects your clients the same way a Property Insurance policy might. After a fire, your clients contact their insurer to assess damages and reimburse them for their losses. Cyber Insurance works similarly after a breach.
- Focus on cost. To a client unfamiliar with data security, data breaches don't seem real. Clients can't see the immediate damage like with, say, a fire. That's why it makes sense to talk about the cost of data breaches. We've detailed that breaches are getting more expensive. The average breach costs $195 per stolen record. Explaining that Data Breach Insurance can offer $1 million in coverage to help them clean up a breach is reassuring.
- Explain that small businesses can be targets. Businesses large and small can be victims of data breaches. In fact, hackers may break into small businesses as a way to get access to larger businesses they contract with. This is what happened in the Target data breach when cyber criminals found their way inside the company's network by first hacking the HVAC contractor who had a access to the company's network. To learn more, read "Why the Target Data Breach Ruling Matters for IT Contractors."
Your Client's Liability Is Your Liability
When your clients have better risk management, you benefit. If your clients don't have Cyber Insurance, they'll have to pay for data breach costs out of pocket. Faced with a hefty bill, clients could wind up suing you to get money to cover it.
If you talk with your clients about acquiring Cyber Liability Insurance, they'll have…
- Some financial protection from the cost of data breach.
- Less reason to sue you.
- More resources to limit the cost and damage of a breach.
That doesn't mean you shouldn't shirk your own insurance. IT consultants should continue to carry Errors and Omissions Insurance because this can help address professional liability lawsuits, including data breach disputes and many others.
There will never be a single insurance policy or risk management strategy that will completely offset your risks. You'll always have to coordinate with your clients and ensure they're doing their best to limit exposures. If your clients aren't prepared for the cost of a data breach, use the strategies outlined here to protect them and your own business.
