Why Small Businesses Are Hesitant to Embrace Cyber Insurance Despite Growing Cyber Threats

Cyber Risks: A Growing Concern for Small Businesses

Small-business owners are increasingly aware of the cyber risks they face, yet many remain skeptical about purchasing cyber insurance. According to a recent survey by the Insurance Information Institute (I.I.I.) and J.D. Power, 12 percent of respondents experienced at least one cyber incident in the past year, up from 10 percent in 2018. Despite this, 44 percent of small businesses do not have cyber coverage, and 64 percent of those do not plan to buy it in the next 12 months.

Cost and Risk Perception: Major Barriers to Cyber Insurance Adoption

The top reasons cited for not buying cyber insurance include cost (42 percent) and the belief that their risk profiles do not warrant coverage (35 percent). Additionally, 27 percent believe they manage cyber risks sufficiently internally, and 17 percent are deterred by too many exclusions in insurance policies. These findings suggest that insurers have the power to address these concerns and potentially increase cyber insurance uptake among small businesses.

Insurer Involvement and Risk Mitigation: Key to Increasing Cyber Insurance Adoption

Among businesses with cyber insurance, 70 percent reported that their insurer assists with cyber risk mitigation, indicating a growing trend of insurers becoming risk-management partners rather than just policy providers. As small businesses increasingly view cyber insurers as trusted partners, the adoption rate of cyber insurance may accelerate. To encourage more small businesses to invest in cyber insurance, insurers should focus on making policies more affordable and addressing coverage limitations.