By Christine Lucas
Conducting business in the cloud can help small businesses save money because they pay only for the space they use in data centers and warehouses to store electronic assets. In fact, this is a rising trend as small and mid-sized businesses are increasingly making the switch to cloud computing. The percentage of companies is expected to more than double from 37 percent to 80 percent within in the next six years.
Although it could save on computing expenses, the cloud brings new risks that small businesses may not be prepared to cover. The two biggest risks of cloud computing are service interruption and data loss. Nearly half (48 percent) of business cloud computing users have experienced a service interruption and 56 percent said at least one interruption prevented their company from functioning, according to a survey by Hartford Steam Boiler and the Ponemon Institute.
Since the cloud is not actually in the sky and instead is in physical buildings, power outages are a concern. With increases in severe weather incidents such as hurricanes, ice storms, tornadoes and lightning, and the aging electrical grid, these power outages are on the rise. And, no matter how well it’s maintained, equipment is subject to breakdowns. Both power failures and mechanical breakdowns can interfere with a business’ operations and result in lost income — which is of special concern to small businesses which often operate on thin margins.
Small businesses that rely on cloud computing should consult with IT professionals to ensure they’re taking the proper precautions to maintain access to critical software and storage and to protect their data as much as possible. But, because there’s no way to completely eliminate the risks of service interruption and data loss, they also should make sure their business insurance includes coverage specifically for cloud computing.
For example, to protect our small business customers from the emerging risks of cloud computing, Erie Insurance recently introduced a unique coverage called TechAdvantage™. If a small business owner suffers a loss caused by cloud computing, the coverage can pay for:
- Data research, repair and restoration services;
- Direct property loss for the cost to repair or replace covered equipment that is damaged;
- Lost business income and extra expenses when a customer’s cloud service provider experiences an outage or equipment breakdown for covered reasons; and
- Because outages and data breaches can damage a company’s reputation, up to $5,000 for public relations services to assist in communicating with clients, the public and the media.
And, while not directly related to cloud computing, TechAdvantage also pays for failure of microelectronics when physical damage can’t be detected. For decades, breakdown and other property insurance has been triggered by a loss due to physical damage that could be observed and identified. But today, equipment components are becoming so tiny — in many cases microscopic — that it can be difficult or even impossible to see the damage when the equipment fails. So, this coverage represents a leap forward for the industry by providing coverage when electronic circuity stops working for no apparent reason. This is another area a small business should discuss with his or her insurance agent.
Today’s technology-enabled business environment has reduced barriers to entry and created the potential for small business owners and entrepreneurs to reap great rewards — but with those rewards come new risks. As long as small businesses are prepared, the sky’s the limit as to what they can accomplish.
Christie Lucas is vice president and product manager for Commercial Lines at Erie Insurance, a property/casualty and life insurance company founded in Erie, PA in 1925. ERIE has a program that includes products and services specifically developed to provide small businesses with the protection they need. More information can be found at ErieInsurance.com and by following @erie_insurance.