Digital platforms have undoubtedly revolutionised ways of doing business, with payment innovations like e-commerce, for instance, making it simpler and convenient for businesses to sell their products and services at the click of a button.
“On the other hand, digital evolution has also led to internet-based liabilities and risks that could harm the reputation of a business and impact profits. Small businesses often overlook these risks under the assumption that they don’t need cyber liability insurance, however, this has been proven to be untrue when considering the prevalence of cyber risk-related incidents,” says Malesela Maupa, Head of Insurer Relationships at FNB Insurance Brokers.
Cyber risk is very broad, it includes any risks of financial losses, disruption or damage of a company’s operations from data breaches to failure of its information technology systems.
“From an insurance perspective, it is treated as a sub-category of general insurance that covers businesses against the liabilities that may arise following a data breach. Any business that stores and maintains customer information, collects online payment information or, uses the cloud, should consider adding cyber liability insurance to its budget to safeguard the data they hold and mitigate against cyber-related risks,” adds Maupa.
He says SME’s should take heed of the following on cyber liability insurance:
- It’s not a tech solution: cyber liability insurance does not replace cybersecurity. It’s a short-term insurance solution that protects businesses against liabilities that may arise if they were to get exposed to cyber-attacks. For example, dealing with customer lawsuits following a data breach, loss of business income, reclaiming your digital and financial identity.
- Insurance premiums: monthly premiums vary depending on the business sector, type of services offered, data risks and exposures, data security, data control policies and annual gross revenue and other factors. FNB Insurance Brokers can always advise on which short-term insurance cover is best suited for your business.
- Two types of cyber liability insurance coverage: first-party and third-party. First-party includes direct losses to a business or individual, whereas third-party extends to claims and legal action taken by customers or business partners and suppliers.
- These are the costs involved in cyber risks: cyber liability insurance will often cover business legal fees and costs related to recovering compromised data, repairing systems, restoring the personal identities of affected clients. The importance of cyber liability insurance is to help a business to recover from data breach risks by mitigating some of the associated costs that may arise due to the cyber-attack.
“Given the prevalence of cyber-related risks, having cyber liability insurance cover is no longer a question of “maybe” or “not”, it has become a business need,” concludes Maupa.