Last year, Westfield Insurance published the Agency Challenges Research Report, which asked agents how much of an impact they believe various industry trends will have on their agency in the next 10 years.
In keeping with other industry findings, cyber liability came out as the issue that is expected to have the most significant impact. As many as 2 in 3 respondents feel that cyber will have a significant impact on their agency in the next decade. Meanwhile, about 3 in 4 Westfield small commercial agents said fewer than half of their small business customers currently have some sort of cyber liability coverage.
However, when a cyber event occurs, there are many costs associated with managing the event from notification to impacted individuals, breach investigation expenses and credit monitoring services, as well as the potential for damaging the business’ reputation.
“The costs of response and remediation can be significant if a small business’s computer system is hacked or customer, employee or partner data is otherwise lost, stolen or compromised,” says Robyn Hahn, president, small business, Westfield.
“Without adequate insurance, these costs could cause a small business to close for good,” Hahn says. “Cyber policies can be customized for the business and can cover several types of risk including loss or corruption of data, business interruption, multiple types of liability, identity theft, cyber extortion and reputation recovery.”
The main obstacle agents face when recommending cyber coverage to customers is the customer not feeling they need this coverage, followed by the customer not understanding what cyber liability covers and not having the budget for this coverage, according to the study. Educational materials about the benefits of cyber liability, what it covers and who needs it are recognized as a beneficial tool for agents when talking to small business owners about cyber liability.
“Agents have a big opportunity to connect with small business owners about cyber threats,” Hahn says. “First, underscore the exposure that is unique to small business owners and then let them know access to experts and mitigation tools aren’t as costly as they may assume. It’s a nominal fee for peace of mind that their business is being monitored for cyber risks and exposures.”
Small business owners also find hiring and retaining staff to be another challenge. Restaurants face rampant employee turnover with 75% of employees leaving their current employer annually, which is 1.5 times higher than any other service industry, according to Westfield.
“Such turnover can make it difficult to sustain efforts to increase sales, can cost the business money when employees leave before getting the full benefit of the training provided, and leads to inconsistent quality and decision making,” Hahn says.
But importantly, dealing with unqualified staff or short staff can lead to mistakes, such as a data breach, Hahn explains. “Employee mistakes are one of the leading causes of a small business suffering a cyber incident. If the staff does not take cybersecurity seriously the small business may be at greater risk of suffering a cyber incident. Additionally, with inexperience also comes an increased potential for injury, which can raise the number of workers’ compensation claims filed by employees. This can result in hefty insurance rate increases.”
Insuring against cyber risks and employee turnover is complex and can be very expensive—but not impossible. However, it is important that independent insurance agents see things from a small business owner’s perspective.
“Small business owners are extremely busy wearing many hats to keep their business running smoothly,” says Amir Farid, small business chief operating officer, Westfield. “Many times, they start to research insurance online, but the terms and coverage possibilities are complex, so they then turn to an agent.”
Finally, money is always on small business owners’ minds, including cash flow, accounts receivable, payroll, overhead costs, loans and having the capital to expand their business. These small business owners said they would appreciate advice about handling finances, including their insurance needs, as long as the service is “easy” and “straightforward,” Farid says.
Small business owners appreciate a personal touch that shows you truly understand their business, so do your homework and listen to their challenges and their plans for growth and help them find the right carrier to meet those needs, Farid says. “Proactively offer useful information on a consistent basis and provide flexibility to help them manage their policy.”
“Be that small business owner’s advocate—ask questions, understand their business and consider making a trip to see their business in person,” he adds.
Will Jones is IA senior editor.