The coronavirus lockdown has seen a growing number of businesses relying on online trade, and this boom in ecommerce has seen a spike in sales of cyber insurance across the UK.
But what is cyber insurance? And why does your business need it?
What is cyber insurance?
Cyber insurance is a type of cover to protect your business against the risks of trading online, including data breaches that could compromise the personal details of your employees, clients and customers.
Why do you need cyber insurance?
Even if you don’t trade online, if your business relies on technology to take care of its day-to-day operations, and any data breach could be catastrophic for both you and your customers – this includes taking customer payments on a PDQ machine or using computer systems to process payroll for hundreds of staff.
If, for instance, you run a small business with even just two or three employees, you could see your business crippled by multiple compensation claims if your systems are hacked and their data is compromised.
As if that wasn’t bad enough, this problem can grow exponentially if you have clients who themselves have employees, as a breach of your systems could lead to a breach of their systems – before you know it, you’ve even more compensation claims and associated legal fees coming your way.
If you think your business is adequately protected from hackers, or is too small to be targeted, consider that cyber crime is constantly evolving, and a growing number of criminals are actively targeting small businesses because their security systems are thought to be less stringent.
If you think you couldn’t possibly be held responsible for a data breach, maybe because you don’t do business online or you don’t store any data digitally, consider that simply losing your smartphone could see you on the receiving end of a claim if that smartphone has any client or employee details stored in its address book.
In short, if you’re using any type of tech to help run your business, from a simple smartphone to a sophisticated server, then you have a cyber liability risk on your hands.
Why are more businesses taking out cyber insurance?
With majority of the brick and mortar retail shops closed due to COVID-19, online sales have become the new norm in the UK with its demand increasing, making cyber cover one of the few methods of growth in the insurance market, says Global Data, a leading data and analytics company.
Food and groceries sales are thriving during the government-imposed lockdowns. In the UK, number of grocers, including Ocado, Sainsbury’s and Waitrose have had to expand their delivery services to cope with the growing online sales.
According to GlobalData, the online grocery sector is forecast to account for 8.4% of the grocery sales in 2020 and generate an additional £1.8bn (US$2.22bn) more than what was previously expected. Across the entire retail industry, online sales are expected to grow at a faster rate than offline sales over the next four years.
Yasha Kuruvilla, Insurance Analyst at GlobalData, comments: “As online sales have become increasingly popular, businesses will face greater cyber risks. Retailers will hold more digital records of sensitive personal information, including payment details, than ever. According to a report from Shape Security, hackers account for more than 90% of login traffic on e-commerce websites.”
Insurers may also see an uptick in fleet motor and van policies. Companies will have to scale their delivery capabilities to meet demand by expanding fleets, which could see expansions in such policies.
Kuruvilla concludes: “This may not translate into new policies for large retailers that are more likely to already have cyber and fleet insurance products in place. However, some SMEs have explored the online channel in order to generate some sales during the lockdown. With online sales increasing in popularity, it is likely that some of these SMEs will make online sales a lasting feature, opening the door for new insurance policies to be sold.”