Cyber insurance was once a luxury that only very large franchisors could afford. Today, given the frequency and severity of online attacks--and lower premiums--every franchisor, regardless of size, needs to seriously consider securing this important protection. The question to ask is no longer "Will I be hacked?" but "When will I be hacked?" A 2017 PricewaterhouseCoopers survey reported a 38 percent increase over 2015 in cyber hacking events.
The days of thinking your company is too small to be hacked are gone. In fact, we have seen a shift in behavior where many hackers are targeting smaller companies because they have weaker controls and detection than larger companies. Further, the proliferation of hacker services for sale on the "dark web" has accelerated this trend.
Now, anyone can go online and purchase--cheaply--hacker services to take down a website or steal information without any prior hacking experience. This has opened the door for traditional street criminals to take their crimes online with a much lower risk of prosecution compared to traditional types of criminal activity.
SEEK TRUSTWORTHY, KNOWLEDGEABLE INSURANCE BROKERS
Hackers can be cyber criminals, disgruntled or prospective employees, angry customers, competitors, foreign governments, or activists--the so-called hacktivists.
The actual costs and reputational damage are astonishing. Industry experts estimate the average cost per record is $158. Thus, a franchisor with just 25,000 records could suffer over $4 million in damages as the result of a breach. In addition, we continue to see the cost of breaches trending upward, especially with respect to cyber extortion. As cyber criminals are becoming bolder, they continue to up the ante as they experience success in extorting larger amounts of money from small companies.
Unfortunately, no two cyber insurance policies use the same wording and approach; the insurance industry lacks standardization in this area. This makes it more challenging when determining the best product. Price alone is not a good determining factor--in fact, the least expensive option is usually the most restrictive. Seeking a trustworthy and knowledgeable broker is paramount in the acquisition of cyber insurance.
INDUSTRY PRESENTS UNIQUE CHALLENGES FOR COVERAGE
During the procurement of cyber insurance, there are important differences between carriers and coverage enhancements that are compulsory in obtaining the appropriate coverage.