- Cyber insurance is also known as cyber liability insurance or cyber security insurance. It is a type of insurance that protects business entities from the effects of cybercrimes. It compensates for the financial losses that may arise out of Cyber Crimes associated with organisations that do business online.
- In India, companies generally tend to opt for policies in the range of Rs 40 crores- Rs 200 crores as the sum insured with the typical premium being around 1-4 per cent of the sum insured.
- Cybersecurity, in India and around the world, is a new and emerging industry.
About 7 lakh individuals were victims of cybercrimes in India in 2020. Today, India ranks second when it comes to spam or phishing. High profile data breaches are becoming more and more common. Especially in the current pandemic context, since people work from home, there is a greater risk of such attacks happening. This increases the importance and needs for cyber risk insurance in India.
So, how do you protect yourself or your business in such a scenario? Well, the insurance industry’s answer is cyber insurance.
What is cyber insurance?
Cyber insurance is also known as cyber liability insurance or cyber security insurance. It is a type of insurance that protects individuals or business entities from the effects of cybercrimes. It reduces the financial risk that is associated with organisations that do business online.
Cybersecurity, in India and around the world, is a new and emerging industry. Companies that are adopting or purchasing cyber insurance products are being considered early adopters. Having cyber insurance means the insurance company covers the fees, expenses and legal costs involved with cyberattacks.
Also known as cyber risk insurance, this policy is typically meant to protect businesses or individuals from cybercrimes such as spyware, ransomware and distributed denial-of-service attacks. The cost of investigations and litigation following such an assault can also be part of the claims.
Is cyber insurance really necessary?
Indian businesses incorporating technology in their operations is helping them streamline processes, increase growth and improve productivity. Many businesses are also establishing themselves online, because of which there is an increased risk and fear of online data theft and other cybercrimes.
According to the Allianz Risk Barometer report in 2021, cyber incidents are the third most important global business risk. Cyber incidents include cybercrime, IT failure/outage, data breaches, fines and penalties. In 2020, cyber incidents ranked first on the Barometer. It poses more danger than market developments, macroeconomic developments, changes in legislation and regulation, political risk and violence and climate change.
According to the Data Security Council of India, between 2016 and 2018, India had the second most number of cyber attacks around the world. In 2019, Indian businesses lost Rs 1.25 lakh crore due to cyber attacks. In fact, the research firm Cybersecurity Ventures predicts that by the end of 2021, cyber crimes may cause damages up to $6 trillion.
For these reasons, having a cyber insurance policy in place has become increasingly important for a business or individual in India.
What is usually covered under cyber insurance policies?
A cyber insurance policy can cover the following:
- Insured’s bank account, debit card, credit card, or mobile wallet.
- Costs of prosecuting the hacker/stalker.
- Costs of malware-related data restoration.
- Defense cost for claims against the insured by a third party.
- Financial losses incurred due to a fake email attack, and costs of prosecuting culprits.
- Phishing attacks. Policies can safeguard against fraudulent use of bank account, e-wallet, debit card, credit card to make online purchases by a third party.
- Protects against extortion losses and reimbursement of costs of prosecuting culprits.
In India, companies generally tend to opt for policies in the range of Rs 40 crores- Rs 200 crores as the sum insured with the typical premium being around 1-4 per cent of the sum insured.
Additionally, apart from the above, individual and corporate insurance plans can cover the cost of hardware, for example, in a cyberattack case that causes a computer to burn off.
Pro tip: What these policies generally don’t cover is the potential future profits that might be lost in the event of a cyber attack and the loss of value because of intellectual property theft. So, do keep that in mind.
Do you need a cyber insurance cover?
Do you create, store and manage electronic data online such as customer sales, customer contact details, credit card numbers etc? Are you connected to the Internet? Are you an e-commerce business?
If your answer is ‘yes’ to one or more questions, then you should definitely consider getting cyber insurance for your entity.
Today, businesses and business executives are becoming more anxious about data security breaches and hackers. One hears of such breaches on a daily basis in the media. Any business that stores customer insurance on a website can greatly benefit from liability coverage under cyber insurance policies.
While cyber insurance has become a greater matter of discussion in the last few years, only 15-20 per cent of the companies in India are actively considering insuring their risk through cyber insurance. In 2018, 350 cyber insurance policies were bought by Indian corporates, marking a 40 per cent increase from the previous year.
Major sectors that are seeking cyber insurance in India are banking, IT, ITES, financial services, pharma, retail, manufacturing and hospitality.
A security violation or identity theft can cost you a lot of money. It can also cause you unnecessary mental stress. It is a better idea to cover yourself or your company from such cyber liabilities by investing in a cyber insurance policy. This will help you deal with the consequences that may arise due to a future cyber-attack or other technological difficulties.
Since cyber insurance is a new sector and market, policies will vary from one provider to another. To choose a policy, review carefully the policy details to ensure it contains the protections and provisions your business requires.