Today, taking credit and debit cards is the norm for restaurants. Most customers expect to be able to use plastic and as many of 92 percent of restaurants accept it. While most restaurant owners may consider fees to be the biggest headache associated with cashless payments, data breaches are a much bigger – and potentially costlier – threat, according to Ted Devine, CEO of small-business insurer insureon.
In its 2014 Data Breach Investigation Report, Verizon reported that 75 percent of data breaches at accommodations businesses (including restaurants) happen through point-of-sale systems. This means the vast majority of breaches at restaurants are enabled by a piece of technology that almost everyone’s using.
Devine notes that credit bureau Experian reported recently that a shocking 60 percent of small businesses that are hacked go out of business within six months – and the FBI warned last fall that small businesses “will be hacked.” One reason for businesses closing down, of course, is that data breaches are expensive. Depending on state laws, businesses might have to pay to notify affected customers, provide credit monitoring services, and pay regulatory fines. With a high volume of customers, the costs add up quickly.
The good news: cyber liability insurance can cover those costs. But adoption rates are low: Advisen reported last month that less than 3 percent of small businesses carry cyber insurance. Among insureon’s customers, fewer than 7 percent even request quotes.
The most likely reason for the disconnect between hacking exposure and risk management is a lack of understanding: restaurant owners aren’t buying cyber insurance because they don’t realize they need it. In fact, many restaurants may believe they’re covered for data breaches by their general liability policy, but in most cases, that’s not the case. (After P. F. Chang’s data breach, its GL insurance provider specifically denied that data breaches were covered by the policy.)
Devine advises that operators contact their insurance agent and ask about cyber liability insurance. In some cases, it can be bundled with existing coverages and often costs less than $2,000 per year.