IDG Contributor Network: Cyber insurance: data breach, business interruption and beyond

In today’s market, no growing business can isolate itself from online communications and commerce. Yet avoiding the internet entirely is the only way to guarantee your company will not be exposed to cyber threats. Once a business is online it will always be exposed to some residual risk it cannot feasibly address in a disaster recovery plan, business continuity plan, or through an information security technology solution.

As a business owner, a hack isn’t just your website going offline or your data files locked up for ransom slowing down productivity. Based on industry regulation and data privacy laws, you could be liable for fines, and until you remediate any vulnerabilities found, you may not be able to re-open for business to serve customers and generate revenue. This is where a quality cyber liability and business interruption insurance policy comes into play. With a policy payroll goes through, bills can get paid, and your life can continue as “normal” as it can during the crisis that is a major cyber incident.

The devastating financial impact of a cyber incident

Businesses, especially small and medium-sized ones, should prepare for the possibility of a data breach. That risk is no longer a remote one. The Ponemon Institute surveyed small businesses in the U.S. in 2017 and found that more than 61 percent had experienced a data breach, an increase from 55 percent in 2016. Another worrying statistic: Sixty percent of small companies go out of business within six months of a data breach. The financial impact is one big reason.

According to Dr. Larry Ponemon, the founder of the Ponemon Institute, the average cost in 2017 of a data breach due to damage or theft of IT assets and infrastructure is $1,027,053, and the average cost due from disruption to normal operations also increased to $1,207,965 — a combined total of over two million dollars from a cybersecurity incident from direct IT remediation costs and indirectly through lost revenue.