Insurance covers that protect cos from cyber attacks, data thefts & frauds

With Indian businesses and organisations increasingly moving to digital processes in their operations, many of them are taking cyber insurance covers to protect themselves against cyber attacks, data thefts and frauds.


“Initially, the demand was coming from the IT/ITeS companies, but now it is coming from all the industry segments. Post the ransomware attacks of 2017, the demand for cyber insurance from the manufacturing sector has been on the rise,” said Sanjay Kedia, country head and CEO, Marsh India Insurance Brokers.


“With the introduction of the EU General Data Protection Regulation, and the approval of India’s Personal Data Protection Bill, we foresee a major increase in buying and enquiry from clients,” he added.


According to the World Economic Forum’s Global Risks Report 2019, data fraud and large-scale cyber-attacks are a huge risk to organisations. In India alone, more than 394 million data records have been lost or stolen in publicly disclosed breaches between 2013 and 2018, according to the Gemalto Breach Level Index and Varonis, a company that provides data security solutions. India was also the second most affected country between 2016 and 2018 when it came to targeted cyber-attacks, according to Symantec’s Internet Security Threat Report.


Industry experts say that the need for data security has become paramount with the coming of the digital economy and the expansive base of internet-based enterprises such as Flipkart, Amazon, Swiggy, Ola and many others.


“With economies increasingly integrated with cloud, block chain, artificial intelligence, cybercrime is seen as the greatest threat to every profession, industry, and company in the world. Hence cyber liability insurance is becoming increasingly relevant and a must-have,” said Sanjay Datta, chief – underwriting, claims, reinsurance & actuary – ICICI Lombard.


Like any other insurance product, cyber insurance is a contingent capital which comes to the rescue of clients if they suffer any loss post an event. Usually, these insurance products give the customer cover against data breach, data theft, malware attack, among others.


These policies also cover liabilities caused by others such as errors of commission, errors of omission, data breaches, data theft of business secrets and defamation and related negative publicity. They may also cover expenses arising out of post-incident management, public relations initiatives, major investigations related to the incident, among others.


Though the cyber insurance segment in India is at a nascent stage, its growth has been remarkable so far. In 2014-15, only one cyber insurance policy was sold.  Today, the insurance industry has underwritten more than 400 cyber insurance policies.


The surge in demand has come from banks, non-banking finance companies (NBFCs) and payment processors handling customer data like credit card information, which make them vulnerable to cyber-attacks and breaches. Moreover, many insurance companies, both life and general, are themselves buying cyber insurance covers.


“While the predominant interest is coming from IT services and BFSI sectors, companies in IT software, retail, hospitality, healthcare, BPOs and utility are also showing strong interest in taking cyber insurance covers,” said Vaidyanath Balasubramanian, underwriting manager, SBI General Insurance.


And it is not just businesses — cyber security covers are being sought by individuals as well. The main features of cyber risk insurance for individuals include coverage against online and social media attacks, data breaches, identity theft, extortion and bullying.


ICICI Lombard General Insurance, for example, has a product called Commercial Cyber. The policy can be issued to an entity (groups whose members are involved in online transactions on e-commerce platforms/wallets), and the insured will be individuals in their personal capacity. Companies such as Mobikwik and PayTm are learnt to have taken such covers. 


However, there are a few issues that continue to be a drag on the cyber insurance segment. According to Kedia, “Since cyber insurance in India is still not as developed as other lines of insurance, Indian insurers have limited appetite and in such scenarios we approach foreign insurance markets for capacities.”


Moreover, the client’s own property damage arising out of a cyber-attack is currently not covered under the cyber liability insurance.


Experts believe that with India poised to pass its first major data protection law, which will place new restrictions on how corporations can collect and use personal information, it will broaden the base of those who want to opt for cyber insurance.


“There is an increased activity coming from the professional service sectors (like legal firms), manufacturing and media companies. With higher capacity building up in the market, we do expect a doubling of conversions for the next 3-5 years,” added Balasubramanian of SBI General Insurance.


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