COVID-19 changed everything, including insurance. New risk opportunities emerged with each lockdown that included increased cyber threats among a dispersed workforce. With risk evolving at such a rapid rate, one can’t help but wonder: Does the average founder of a small to medium-sized enterprise (SME) understand their risks and business insurance? Do SME clients understand the importance of risk transference should a data breach occur?
My team at Embroker conducted a survey of 500 SME owners, CEOs and tech startup founders and found a discrepancy between what founders know about risk and the actions they have taken to mitigate that risk. Embroker found that only 22% of owners and founders say they have read and understood all of their policies.
The good news is half of the owners and founders rely on a broker to sign up for coverage, which may improve their understanding. Embroker research also shows that SME owners lack an understanding of insurance industry standards regarding risk mitigation and often look to brokers for better education.
The report shows that 25% of owners and founders rely on the broker to fully research and price out their options. One in five admitted to not knowing how their insurance purchases are handled.
Almost one in three (29%) SME owners allow their insurance to auto-renew without making changes, while 74% of tech founders either engage with a broker or have someone internal to assess their needs and options upon renewal.
See also: A Commentary on Agents & Brokers
As business threats intensify and concern grows, both owners (46%) and tech founders (57%) fear they don’t have sufficient coverage in the event of a ransomware attack. But the concern about this risk remains low: 63% of SME owners believe they are unlikely to face a data breach or ransomware attack.
Tech founders, on the other hand, are more aware of cyber risks than other industry business owners. 58% of tech founders believe they are likely to face a data breach or ransomware attack. However, tech founders are still not securing coverage, with only 34% having cyber policies. Why is this?
It’s likely tech founders don’t understand how transferring their risk in the event of a cyber attack can dramatically help their business, or they accept the popular assumption that obtaining cyber insurance puts you at greater risk of an attack. This is simply not true. Here’s the reality: It’s not if a company will face a cyber attack, but when.
We now know that COVID-19 pandemic created a dispersed workforce and thereby created more opportunities for hackers to spot weaknesses. Ransomware-as-a-service is becoming an increasingly common tool. According to ABC News, cybercrime is up 600% as a result of the COVID-19 pandemic.
To learn more about the business insurance approach for SME owners, CEOs and tech founders, download the full report here.