Cyber Insurance for Businesses: Importance, Coverage, and Exclusions in Safeguarding Against Cyber Threats

What is Cyber Insurance?

Cyber insurance (Cyber security or cyber liability insurance) is a product that facilitates businesses to reduce any financial risks against malware and ransomware cyber-attacks. The insurance policy acts as a safety net and supports businesses with financial reimbursements when attacked by cybercriminals in incidents of any fraudulent transactions, unauthorized access to confidential data leading to cyber extortion, etc. when business reputation and operational continuity are at risk.

Why do businesses need Cyber insurance?

In the AI-driven technology and data landscape, businesses are heavily dependent on the Internet for operations and growth. But, this reliance on digital platforms increases the vulnerability to cyber risks and data breaches. According to a Deloitte report titled, ‘Cyber Insurance in India’ in 2023, the cyber insurance market is estimated to be USD 50 – 60 million, with a steady CAGR of 27 – 30 % in the last three years. The growth is further expected to continue consistently in the upcoming 3 – 5 years led by an increase in awareness.

When a cyber security breach occurs, it can harm the company’s reputation leading to mistrust of consumers and hefty fines when a piece of sensitive information is compromised. Furthermore, cybercriminals can also initiate false wire transfers by stealing client’s online banking credentials by hacking the computer’s systems.

The cyber-attacks can have a devastating impact on company finances inducing substantial losses and operational blockers. Without a good cyber insurance policy, many companies will have an extensive struggle to fight against the threats and compensate for the financial and reputational damage.

The top 5 sectors which are highly prone to cyber-attacks are:

·?????? Information and Technology

·?????? Manufacturing

·?????? Finance

·?????? Energy

·?????? Consumer Services

With comprehensive cybersecurity measures, which primarily include cyber insurance, companies can safeguard their businesses easily. This ensures financial protection against the impact of cyber-attacks, releasing their bandwidth to focus on product innovation and business growth without any worries about potential cyber incidents.

?What does cyber insurance cover?

Cyber insurance provides coverage for an extensive array of expenses when a cyberattack disturbs the operations of the insured company. Some of the key coverages provided are -

• Legal Representation

Cyber insurance coverage provides all the resources required for hiring a lawyer for legal representation of their business in court, negotiating with regulatory professionals, and covering the cost of any potential settlement after the verdict.

• Malware Attack

When a malware attack harms the computer’s business systems, the cyber liability coverage provides the required resources to recover the affected systems and defense costs for any legal claims.

• Phishing

Cover for any financial losses incurred due to unauthorized access to any confidential records and financial frauds induced by it.?

• Cyberstalking

Cover for legal representation costs as well as protection for businesses stalked using electronic means.

• Identity Theft

The policy offers protection against any incidental identity theft and supports the expenses for any legal proceedings and any potential settlements after the verdict. The cost of initiating third-party legal claims and any additional recovery expenses associated to theft will also be covered.

• Data Breach or Privacy

Cover for legal costs when the business is impacted by a data breach or invasion of data privacy.

• Reputational Damage:

Comprehensive coverage for any financial losses due to reputational damage led by a specific cyber incident, which also extends to the loss in profits and expenses for public relations campaigns and crisis management activities varying according to the policy premium.

• Cyber Extortion

Cover for any ransomware attacks when cybercriminals demand payment to return access to data or systems. The policy coverage could provide financial reimbursement for ransom payments and any expenses to provide negotiation with cyber criminals and facilitate a quicker recovery.

• Computer Forensics

Financial support for any expenses involved in the investigation of a cyberattack, including employing a forensic expert to assess the affected systems, retrieve the data, and detect any potential gaps. Insurers help the insured get clarity on the data breach and enforce security measures to prevent future attacks.?

• Extended Reporting Period:

The coverage offers an extended period for businesses to report any incidents or attacks that occurred after the policy expired with an additional premium. This ensures auxiliary protection for any claims arising from past incidents and continuity of coverage.

What does cyber insurance not cover?

• Any claims from pre-existing data privacy breaches or other cyber incidents like IT theft loss, cyber extortion, cyberstalking, malware damage, etc. before the purchase of the policy will not be covered.
• The overall expenditure to enhance the technology systems and strengthen the current safety systems of the businesses.
• When any employee or insider has initiated the cyberattack, the insured will not get the benefit of coverage from the insurer.
• Any claims about a physical injury, sickness, disability, or death are not covered. But, any case of proven mental anguish due to the cyber attack may be covered.
• For any intentional non-compliance or fraudulent acts or breaches conducted by the policyholder or partners is not included in the coverage.
• The claims due to warlike situations like an invasion, activities of foreign enemies, rebellion or revolutionary acts, or government actions are excluded from the coverage.

?Conclusion:

Businesses, typically the SMEs lack an extensive cybersecurity infrastructure, where cyber liability insurance can be the safety net and offer coverage for legal fees, reputational damage, data restoration, and management and other requirements based on the policy exclusions and coverage. For any information or queries on a customized quote for cyber insurance or any other insurance solutions for your business, drop us a message here or write to us at [email protected].