Small Business Cyber Gap

Yvette Prichard says cyber insurance continues to be an area where small businesses have significant gaps in their insurance portfolios. “It is a big risk; any business that does anything on a computer needs cyber liability,” said Prichard, who is president of small business, at Heffernan Insurance Brokers in Walnut Creek, California.

According to Hiscox’s Cyber Readiness Report, which surveyed 5,000 cyber security professionals across the globe, including more than 500 small business professionals in the U.S., despite a 10% increase in median information technology budgets and a 24% increase in cybersecurity spending over the last 12 months, 59% of small businesses don’t use security awareness training.

Among the U.S. businesses surveyed, the reported median cost of cyberattacks has decreased from $10,000 in 2022 to $8,300 in 2023. However, the median number of attacks has risen from three in 2022 to four in 2023.

Hiscox reported that U.S. small businesses paid over $16,000 in ransom for each ransomware attack over the past 12 months due to cyberattacks. While over half (53%) of small businesses responding to the survey said they have either a standalone cyber insurance policy or coverage through another policy, preventative measures and training to avert attacks lag. Two out of five (43%) businesses surveyed don’t have network-based firewalls, and 41% surveyed do not use data backup recovery and restoration systems.

When it comes to cyber expertise, 63% of small businesses in the U.S. were considered “intermediates” when it comes to cyber prevention measures, and only 4% were considered cyber “experts.”

Prichard said it’s a good time for small businesses to consider purchasing cyber coverage. “Right now, the market is pretty soft for small business cyber liability,” she said. “We’re really trying to encourage small business clients to purchase it now because it is affordable.”

But with rising premiums in property, liability and auto, and higher costs in general to run a small business, owners are reluctant to buy, Prichard added. “They’re not even considering it because it’s just not something that they can afford right now.”

Cyber coverage is affordable, especially for small businesses, agrees Bart Dugdale, associate managing director, Burns & Wilcox, based in the Ruston, Louisiana, office. But right now, as small businesses are analyzing every dollar they spend, they aren’t ranking it high on their insurance spend, he said. “Which is not a problem, until it’s a problem.”