Home > Property & Casualty > Survey shows small to midsize business not prepared to handle consequences of a data breach

Survey shows small to midsize business not prepared to handle consequences of a data breach

data-breachNew research shows that smaller companies are especially vulnerable to data breaches, according to a Poneman Institute survey released last week. The survey found that more than half of U.S. small and mid-sized businesses have experienced data breaches caused by issues such as employee mistakes, lost or stolen laptops and smart phones and procedural mistakes. While 46 states have enacted legislation requiring notification of security breaches involving personal information, the study found that only 33% of companies experiencing data breaches have done so.

Experts say many small companies are not prepared to handle data breaches, leaving them subject to legal penalties for failing to respond in a timely and effective manner. Outsourcing may be one reason data breaches can be such a big problem for small businesses. As a result, these companies may wind up facing serious financial and reputational consequences.

  • 70% of said breaches were more likely to occur when outsourcing data
  • 85% report that they regularly share customer and employee records with third parties (through billing, payroll and other IT services)
  • 62% do not hold third parties liable for any costs related to data breaches

Those considering an insurance policy to fund their losses in the event of a breach need to consider more than just what liability limit to purchase.  Too often, companies fail to consider the forensic, notification, and crisis management costs that are incurred starting the day the breach is detected.  Insurance coverage for these costs must be carefully negotiated with insurers.

More important to business owners may be the pre-claim and post-claim support made available through data breach consultants used by the insurer.  Not all insurers are equipped to provide these services so work with your broker to choose wisely.

How will a data breach crisis be handled at your company? Do you understand how your insurer will help you in the event of a breach? These discussions should take place before a breach.  For more information about Ponemon studies visit: www.poneman.org or click on the studies below to learn more about data breaches and security risks.

Security of Cloud Computing Users 2013 Study

Risk of Insider Fraud: Second Annual Study

The Post Breach Boom

About the Author

Edward Flanagan is an Executive Vice President in the Property & Casualty group and leader of the High Technology Practice at WGA. His responsibilities consist of negotiating complex insurance programs with a variety of clients ranging from venture-backed startup technology companies to publicly traded multinationals.

617.646.0275 | EFlanagan@wgains.com | Connect with Ed on LinkedIn
Follow Ed @ejflanagan

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