We Should Be Paying More Attention to The New Wave of SMB Cyber Claims

For years, cyber insurance was treated as a niche product reserved for technology firms, financial institutions and e-commerce giants. When underwriters and claims teams assessed cyber exposure, the conversation centered on massive data breaches and enterprise-grade network overhauls.

That framework is now obsolete. Small-to-medium-sized businesses have integrated digital payment portals, cloud booking tools and remote workflows that are a huge part of their daily operations. Where digital dependency expands, cyber risk follows.

According to NetDiligence’s 2025 Cyber Claims Study, the average cyber insurance claim for small-to-medium-sized enterprises reached $264,000. By comparison, the median small business holds just $12,100 in cash reserves, according to a 2026 MoneyGeek analysis. This roughly 22-to-1 gap highlights how today’s cyber threats are no longer just an IT problem; they can pose an immediate threat to a small business’s balance sheet.

For claims teams and adjusters, managing this shift requires moving past traditional assumptions about who gets targeted, how losses materialize and where policy coverage begins and ends.

Non-Tech SMBs Are The New Front Line

While high-profile enterprise breaches grab headlines, cyber criminals increasingly target mid-market and main-street operations that lack dedicated chief information security officer leadership. Insureon’s 2026 Cyber Insurance Trends Report highlights this shift across non-technology sectors: policy purchases surged among livery and transportation services (up 106%), medical spas (up 79%) and legal practices (up 52%).

These sectors all have high transaction volumes paired with lean, non-technical IT infrastructures.

Logistics and freight businesses rely heavily on digital bill-of-lading systems and electronic payment transfers, making them prime targets for business email compromise and wire fraud.
Medspas and healthcare clinics process personal health information and payment data via third-party scheduling platforms, creating high-exposure privacy and regulatory compliance risks under HIPAA.
Law firms frequently handle client trust accounts and confidential files, presenting lucrative targets for social engineering schemes.

When a breach occurs in these industries, claims adjusters must immediately evaluate third-party vendor contracts, SaaS platform permissions and critical regulatory disclosure obligations. The speed of initial investigation determines whether a breach stays manageable or escalates into severe litigation.

Micro-Businesses, Phishing And High-Volume ‘Human Error’ Claims

The fastest-growing segment of cyber adoption is at the smallest end of the business spectrum. Insureon reported an 89% increase in policy purchases among sole proprietors.

Verizon’s Data Breach Investigations Report consistently identifies the human element and social engineering as significant factors in cyber incidents, while the FBI’s Internet Crime Complaint Center continues to document substantial financial losses associated with business email compromise.

Sole proprietors and micro-enterprises often operate without internal IT departments or managed service providers. They rely on personal mobile devices, shared email accounts and basic web tools. When a sole proprietor falls victim to invoice manipulation, response time lags because the compromise often goes unnoticed until bank accounts are drained or vendors report unpaid invoices.

Claims departments handle a high volume of first-party fraud and wire transfer claims that require rapid, cost-effective processing to prevent unallocated loss adjustment expenses from exceeding the claim value. To adapt, claims organizations must streamline digital intake tools tailored for non-technical policyholders, helping avoid, for example, deploying a $50,000 forensic response to address a $15,000 loss.

The Multi-Policy Spillover Effect

The most significant operational challenge for claims handlers is that cyber incidents rarely stay contained within a single coverage bucket. Our data show that the share of customers purchasing cyber insurance alongside other policies increased from 68% in 2023 to 81% in 2025. By 2025, the most common bundle included cyber, general liability and professional liability coverage.

When a cyberattack strikes a small business, claims leadership must prepare for cross-policy activation across multiple lines:

Cyber policy: Covers first-party loss, digital forensics and fraud recovery.
Errors and omissions/professional liability: May be implicated when client lawsuits allege professional negligence, breach of duty or failure to protect data, depending on the policy language.
General liability: May be implicated by certain third-party claims arising from a cyber incident, depending on the policy language and applicable endorsements.

If claims departments operate in silos where the cyber adjuster, the casualty adjuster and the professional liability adjuster do not coordinate early, insurers face duplicated defense costs, delayed settlements and conflicting liability positions.

Strategic Action For Claims Leaders

As cyber exposure embeds itself deeper into every corner of the small-business economy, insurance carriers and claims organizations must modernize their claims handling playbook:

Break down department silos: Establish unified loss intake protocols so multi-policy spillovers are identified on day one rather than day 30.
Scale forensic response for SMBs: Build panel vendor relationships offering scaled, fixed-fee rapid triage specifically designed for sole proprietors and micro-businesses.
Create feedback loops to underwriting: Use claims trend data from non-tech sectors to help underwriting teams refine policy exclusions, sub-limits and wire transfer verification requirements for small businesses.

Cyber risk is no longer an enterprise tech problem; it is a baseline operational reality for small-to-medium-sized businesses. The insurers that excel in the coming years will be those whose claims handling reflects this interconnected, multi-policy landscape.

Smith is an executive sales producer at Insureon. She has more than a decade of experience in commercial lines, risk management and Insurtech. Email: denise.smith@insureon.com.

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