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
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
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
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.