The internet has truly changed the way business is conducted. Before the web, all businesses needed brick-and-mortar locations in addition to the funds to buy or lease property. Many businesses today simply begin with a money-making idea, a business plan and a website.
Consumers, too, have switched to shopping, banking, and doing other day-to-day tasks online. In fact, 61% of internet users conduct product research online, instead of shopping around in stores.
Interestingly, 36% of smartphone users in the US compare prices on their mobile phones while in stores - because comparing prices between retailers has never been faster and easier than it is today.
Even brick-and-mortar businesses have to have an internet presence in today's economy, which is a huge cost in addition to rent and other overhead associated with storefronts.
As an internet business owner, you don't have to worry about these issues. However, online and IT businesses still need to take the crucial step of protecting their business investment with internet business insurance.
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Risk Factors for IT Companies
- 100% of companies face competition and consolidation.
- 94% of companies fail to develop and market new products.
- 74% of businesses are concerned about intellectual property infringement.
What Is Internet Business Insurance?
Operating an IT business or internet-based business can put you at risk. You’re probably handling not only your website, but also email, social media and digital assets.
You may also have access to other companies' sensitive data. Although you’re operating on a web-based system, there are still copyright, libel, slander and trademark laws.
Currently, some insurance companies are hesitant to provide certain types of coverage for internet-based businesses because of liability issues.
Keep in mind that a standard business insurance policy isn't likely to provide the protection you need if you’re accused of web-based copyright infringement, data breach or data loss.
Information technology liability insurance can provide protection against a number of threats:
- Computer viruses
- Hacking and cyber liability
- Industrial espionage
- Denial of service (DOS) attacks
- Data breaches and data loss
Another issue that many insurance companies face is lack of information regarding web-based business risks. Every day, new developments occur that offer benefits to web-based businesses and IT companies and also put them at increased risk of adding costs to the business.
Because insurance companies don't have a fail-proof way to calculate the monetary potential of cyber risks, they will typically write exclusions into IT liability insurance policies to limit their own exposure.
The Advantages of IT Liability Insurance
It can be extremely difficult to determine your exact risks, whether you operate an online business, an IT consulting company, or a computer repair service. Starting an online business, whether home-based or out of an office, involves risks other than those you would encounter with a storefront business.
When you create a website, you have the same legal liability as a publisher of a print newspaper or magazine, but most site operators don’t treat the content the same. That’s where internet business insurance comes into play.
An IT liability insurance policy can help you through some of these possible situations:
- An employee places a copyrighted image on your homepage without the owner’s consent.
- The name of your website and business is similar to that of a well-established site with a copyright already established.
- When writing press material or contributing to an online forum, an employee writes disparaging remarks about the competition.
- An outsider hacks your site and shuts down all operations.
- A disgruntled employee tampers with customer payment information.
How to Protect Your Business
Insurance for technology companies can provide critical protection for your web-based business. Additionally, there are a number of strategies you can implement to reduce your exposure. Anticipating potential risks will help you avoid expensive problems later.
- Conduct security audits: Uncover weak spots in your system by having security experts examine your network and servers. Ask your insurance agent for reliable service providers. Reducing your risk also reduces the risk faced by the insurance company, which can potentially result in discounts on your internet business insurance.
- Manage risk: Creating policies and procedures that establish responsible practices within your company can prevent cyber breaches caused by hackers and human error. Make sure your firewall has the appropriate protection and can’t be penetrated, and change passwords periodically.
- Use cloud and off-site backups: If you work with sensitive or mission-critical data, it makes sense to implement extra data protection such as using remote backup storage that can protect against major data loss after a catastrophic event, such as a tornado or hurricane.
Finding the Right Internet Business Insurance
Web-based businesses and IT companies face as many threats as a brick-and-mortar enterprises. While the threats are different, they can have catastrophic results.
One of the most important risk management measures you can take is to protect your business investment with an internet business insurance policy. The best coverage will not only protect you against liability risks, but also help to mitigate the consequences of a cyber attack.
The best way to find that coverage is by collecting several quotes before you buy. Check for highly reputable companies and independent insurance agents before you request a quote from an insurer. There are many companies out there vying for your business, but only a few that are going to be the best match for your business.
If you have a financial planner, an accountant, or a lawyer, they can also give you valuable advice about protection for your company. These professionals can help you measure your assets and liabilities, so you can seek coverage that matches.
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Statista Attitudes towards online shopping in the U.S. 2020
BDO 2017 technology risk factors