In today’s technology-dependent world, companies with access to private and confidential information of third parties or those that operate web sites have a responsibility to keep the information and content protected. From major multinationals to start-ups, such companies are exposed to e-theft, destruction of critical data, failure of service, infringement of intellectual property etc. Apart from facing financial and legal risks due to such incidents, companies also risk losing their reputations and brand value.
Further the current regulatory environment is creating an escalating exposure for companies, with more stringent reporting requirements as well as mandatory notification procedures to be fulfilled in numerous jurisdictions in the event of a breach.
Cyber Liability Insurance protects commercial business against a wide range of first and third party liability from cyber exposures. The policy protects the insured for claims against them as well as insured’s own losses and expenses resulting from Breach of Data Privacy, Data Security Laws and so on.
Cyber liability insurance is yet to evolve in India compared to countries like the US and UK. Security experts say that compared to the cyber security threats and risks that Indian companies face, the cyber-insurance Industry in the country is yet to adapt and grow. Experts again reveal that it is the lack of understanding of cyber security laws, policies and its implications among Indian insurance providers that the Industry is yet to grow as in western countries. It is also a common fact that there are very few cyber-insurance companies in India and the business sector is yet to adapt and grow to meet the demands of companies.
Currently in India, leading general insurance companies – ICICI Lombard, Tata AIG and HDFC Ergo offer insurance cover against cyber risk and threats. Then there are companies like Bajaj Allianz General Insurance and Reliance General Insurance which are in a process to offer such cyber-insurances in keeping with the ever growing demand for such products in India. Some Insurance companies are in process of filling Cyber product in IRDAI. Presently, the maximum cyber-insurance cover provided is Rs 250 to Rs. 300 crore. But again the Indian cyber-insurance providers say that the insurance cover can be raised to Rs 600 to Rs. 700 crore based on the specific requirement of the customers.
It was reported that when HDFC Ergo launched its cyber-threats specific cyber-liability insurance policy in 2012, it had only two customers for that year. But as the months advanced the demand for such insurances increased steeply. ICICI Lombard and Tata AIG being the newcomers who launched their products this year. While these insurance companies have not revealed the names of its clients, they said that most of the customers are IT companies and BPOs which handle third party data.
This is in addition to several financial and banking institutions. Various cyber security experts say that the cyber liability insurance in India is expensive and is not affordable to small companies. For instance, a company seeking insurance has to shell out anywhere between Rs 12 lakh to Rs 18 lakh as a yearly premium amount to avail a cyber-insurance coverage of Rs 10 crore and between Rs 2.4 crore to Rs 3 crore as a yearly premium amount to avail a cyber-insurance coverage of Rs 300 crore.
This premium amount depends on whether the customer’s data is in India or in foreign countries. While insurance companies justify these high premium prices, security experts say that such high premium amounts only decreases the market of small and mid-size companies from availing cyber-insurance in India.
Here, it’s surprising to note that in the United States, a majority of the insurance premium amount of cyber-insurance companies come from the small and mid-size companies. However, Indian Insurance companies say that they have a large demand in the market as they have several enquiries and requests from several companies.
In the E-commerce segment Cyber Risk is the most critical risk, now most of the e-commerce companies are taking cyber risk insurance. In 2014, Indian e-commerce company Jasper Infotech (Snapdeal) took first Cyber Risk insurance, followed by rival Flipkart take the Cyber Risk Insurance from Indian Insurance Market, both policies are backed by different re-insurer of London and Europe. Now One-97 communication (Paytm) and other e-commerce companies also take Cyber Risk insurance for covering their critical risk of Cyber-attack.
In-spite of the advantages of cyber insurance, we should understand that it is not a solution to the security threats or vulnerabilities. One should apply the mind and remove the wrong notion that cyber insurance cannot make-up for the security weakness because it merely transfers the security cost risk from the insured to the insurer.
Moreover, cyber liability insurance has its own limitations because the cyber insurance giants think that a catastrophic global cyber-attack simultaneously could bring down several targets worldwide. These targeted companies (in very large numbers) who have cyber liability insurance in-turn can claim the insurance globally. This is the reason that in the Insurance Industry, there is scope only for limited insurance or reinsurance. Hence, it’s not possible for cyber insurance companies to give comprehensive cyber liability insurance coverage to all the companies.
As India is traversing the path of digital and cyber world and e-commerce being implemented in all sectors, cyber-insurance companies are hoping for the big business because of the cyber security threats and risks in this area. Given the current scenario, India is yet to make its mark in the global market.
The global ransomware attack is said to look similar to the WannaCry attack that hit the NHS and infected computers in more than 150 countries last month.The country’s cyber security agency Computer Emergency Response Team of India (CERT-In) has issued a red-coloured ‘critical alert’ in connection with the WannaCry attack, and warned users to not pay the ransom.
The spread of the virus WannaCry, which locked up more than 100,000 computers, had slowed on Sunday, but new versions of the worm were expected even while the world was yet to take stock of the extent of damage from Friday’s attack.
Considering all fact and risk prospective Cyber Risk Insurance is the most important insurance coverage for all type of industry in India and the Global world, it is also important from an economic perspective.
