Will cyber liability insurance become more widespread among dealerships? Considering the number of security breaches across many industries today, it should.
The average cost of a security breach is $3.62 million, according to a 2017 study sponsored by IBM. And the probability that a company will endure a security breach in the next two years is 27.7 percent.
Much of that sensitive information is stored in the F&I office.
"This isn't an IT issue. This is a business continuity and integrity issue to process data correctly," said John Pappanastos, CEO of EFG Cos.
Some dealerships may assume that because they are smaller than the auto retail giants, they will likely be untouched by a data breach. But regardless of whether an operation is big or small, all it takes is an unprotected system for hackers to enter. And "once hackers are in, they're in," said Maurice Hamilton, EFG's vice president of technology.
Security breaches hurt businesses' finances and their reputation. U.S. consumers have lost more than $107 billion to identity thieves in the past six years, according to Javelin Strategy & Research. In 2016, 15.4 million consumers had $16 billion stolen.
Cyber liability insurance covers companies' liability for a data breach that reveals private customer information. Nationwide's policy, for example, helps with the cost of notifying customers about the breach, restoring the identities of affected customers, recovering compromised data and repairing damaged computer systems.
Dealerships should have procedures in place to help prevent data breaches. But hackers are sophisticated; even with solid security barriers, they may still find an opening. If hackers break through a dealership's security blocks, cyber liability insurance will be an investment a dealer likely won't regret.
