2021 has been a watershed moment for cybersecurity incidents, as cybercrime has become a frequent headline, and cyber criminals have thrived on unsuspecting and/or unprepared businesses and institutions. For example, the Solar Winds attack exposed sensitive data from top companies like Microsoft as well government agencies1, and the Colonial Pipeline attack substantially disrupted the petroleum supply chain2. We have seen an almost 20% increase in data breaches and attacks since last year.
Changing Laws and Expectations:
In response to these threats, President Biden issued an executive order in May 2021 to overhaul the federal regulations governing cybersecurity policies that are applicable to government agencies and federal contractors. This is only a first step; it is likely that states will implement similar policies.
In the private sector, larger companies such as financial firms and healthcare organizations have already implemented mechanisms to protect sensitive business, customer, and patient data, given compliance regulations and requirements. While large companies may be ahead of the curve, many are still unprepared given the sophisticated and ever-changing cyber security landscape.
For small and medium sized businesses (SMBs), the challenges are even greater. The U.S. National Cyber Security Alliance found that 60% of small businesses went out of business within six months of a data breach or cyber security attack. Moreover, many SMBs contract with the government and/or larger corporations, which are increasingly shifting the risks of data breaches and cyber security attacks onto smaller entities through indemnity provisions in their contracts. Therefore, SMBs often face significant first-party and third-party risks.
SMBs often believe they are not targets because of their size. A 2019 Cyberthreat Study found that 60% of senior SMB decision makers believed that they were unlikely to be attacked3. On the contrary, SMBs are easy marks for cybercriminals because their systems are data-rich and vulnerable. While 62% of cyberattacks hit SMBs in 2020, only 43% had any type of cybersecurity defense plans. It's likely that these numbers only grew worse in the last few years given the number of employees working remotely.
Protect yourself and remain compliant:
So, the question is what can SMBs do to protect themselves? To begin with, SMBs should implement proactive solutions to prevent attacks and safeguard data such as:
- initiating employee cybersecurity training;
- preparing or updating policies and procedures governing information security practices;
- instituting managed and monitored patching; and
- implementing multi-factor authentication (MFA).
These are basic steps that can help minimize these risks. Additionally, SMBs should consider sitting down with legal counsel and their insurance broker to evaluate first-party and any third-party risks in the event of a data breach or cyberattack.
One of the most effective ways to mitigate your risk to a cyberattack is to obtain cyber insurance coverage. Cyber insurance is not one-size fits all. Cyber coverage needs to be tailored to your business and to the risks in your business. Otherwise, a cyber policy may provide little to no coverage for first-party or third-party harm in the event of a breach.
For SMBs with existing cyber coverage, you should expect to see premium increases of between 60-100% of your current premiums given the rising incidents. For SMBs that have no implemented MFA, monitored patching, or compliance and training programs, your premiums could go up even higher. Many underwriters may reduce coverage or even cancel existing coverages if technical and compliance policies, like those noted above, have not been implemented.
For SMBs without cyber coverage, you should consider discussing coverage with your broker before your upcoming renewal. Insurance companies are implementing stringent underwriting requirements for cyber coverage, which will require the implementation of technical and compliance policies.
As we move into 2022, SMBs should examine their existing systems, policies, and insurance coverages to ensure that they are protected if and when a cyberattack or data breach occurs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.