security that the smaller companies are off the radar. So then they do as little as possible … These businesses need to be proactive. I like to tell clients, “You’ve got to spend money to save a lot of money.” They’re pennywise and pound foolish. We’ve got to get them over that hurdle. This is a risk management viewpoint, not an IT viewpoint. You’ve got to manage the risk by being proactive. It’s so much less expensive in the end than responding to a breach. If you’re not prepared and responding to it on the fly on Memorial Day weekend, or on Saturday night at midnight when you find out [that you have had a breach], and you don’t know who to call, and you don’t have cyber insurance, now you’re up the proverbial creek. You’ve got to do something and get your head out of the sand.


Newton: Just to piggyback on Collin’s point, that’s the importance for them to purchase the insurance. Something’s happened, and now we have to navigate this very complicated field of forensics, of regulatory compliance, of legal review, of


public relations, where do we even start? And for a small business that might not have that experience or — with all due respect — that sophistication, it is very difficult for them.


VB: [How can insurance help with ransomware?] Hite: Well, three things. One is, I think, ransomware has now allowed the price point to become a commodity. You can go on the dark web and buy the code to become a ransom- ware extortionist overnight. So that becomes the first problem. The second is, my understanding is, 20 to 35 percent of the criminal take is being reinvested in R&D by the


criminals. They’re constantly evolving and that’s where insurance can step in. A well- placed cyber insurance policy will pay ran- somware if you’ve purchased that aspect


of first-party coverage and if you have a really good carrier. They have the forensic knowledge or the panel that will bring people in to help them pay it, get it paid, help get the system restored and do all of that. In the end, cyber insurance is the ultimate backstop on a lot of these costs and problems … And smaller companies, they need it. The Target can withstand an attack. [The retailer booked $162 million in expenses in 2013 and 2014 related to the breach.] The HVAC vendor was gone in about four weeks … These vendors are somewhat the weak link in the process. I had a presentation in front of a local client here recently who convinced themselves, “Well, we don’t take credit cards, we don’t deal with the public, we’re just a distribu- tor.” And we talked a little bit more with the head of IT and the general counsel, and it suddenly became clear they’re tied into Kroger and Whole Foods for order- ing. Well, you now own 100,000 custom- ers because you’re tied into the grocery store systems for ordering. So you’ve got to get your people educated about their risks.


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