India is becoming digital day by day. Everything around us is done digitally. With the advent of digitization, there is more risk to data and privacy. Everything is just done at a single click of a mouse. Business all over the world is done through the internet and there are a lot of risks. It is important to understand that on the one hand the internet has made our work easier but has also exposed the business to different types of cyberattacks. There is a need to protect the business and cyber insurance is an emerging concept to protect the business from risks arising out of cyber-attacks. Cyber Insurance is a risk transfer mechanism that protects the companies from financial shocks and losses and helps them in maintaining their reputation in the market. It is also a risk management strategy adopted by various companies.
According to National Research Council (NRC) cyberattack means “the use of deliberate actions—perhaps over an extended period of time—to alter, disrupt, deceive, degrade, or destroy adversary computer systems or networks or the information and/or programs resident in or transiting these systems or networks“
According to the world risk forum perception survey 2018-19, there is an expected risk of an increase in cybercrime to around 80-82 per cent in the near future which is going to affect the companies on a large scale. With such a rise in the cases of cyber attacks, the companies need to be insured against risks arising out of such attacks.
Cyber Insurance
Insurance is something taken by the person to ensure against uncertain risks. Talking about products like cars, scooters, houses we prefer to take insurance for it with the main reason for protection against any kind of uncertainty or risk. In the same way, cyber insurance talks about insurance of electronic information in cyberspace.
Cyber-insurance can be defined as “the transfer of financial risk associated with network and computer incidents to a third party”
With the increase in cybercrimes, there is a need to be protected. The main purpose of cyber insurance is to mitigate the risk of losses and provide redressal to those who are working mostly with the internet. According to the Data Security Council of India (DSCI), there is around 40% increase in sales of Cyber insurance policy in India in the year 2018 taking 2017 as the base year and it is increasing every year. More and more business owners are purchasing these cyber insurance with the premium ranging between INR 80-100 crores.
Need of Cyber Insurance
India is a developing country. Every business is online these days and there is a high risk of cybercrimes. Every information is available on the internet and there is a high risk of cyberattacks. Therefore to mitigate the risk of losses and redressal of those risks, cyber Insurance plays an important part. Every business owner must be insured on their part and must have a cyber Insurance. It is not true that only big multinational companies are victims of a data breach, rather nowadays more small business owners are the victim of it. As the concept of cyber Insurance is at its nascent stage in India and the main reason behind this is lack of awareness. It is true that many business owners are not even aware of any such insurance, especially the small business owners. There is a need to provide awareness about cyber insurance and its benefits.
HDFC ERGO and Bajaj Allianz are the companies in India providing cyber insurance. There is a need that the business owners should be provided with the knowledge of cyber crimes, cyber Insurance, and its importance. It will also help the business owners to attract investors to their company as the investors invest only in the cases where they feel that their investment is safe and they will get good returns.
Coverage
Most cybercrime starts with the breach of data where someone gains any illegal access to other computers, software, or business networks. There lies a risk to a company’s assets, employees, and customers’ information. There is also a high risk of cyber extortion, fraud, and many other crimes.
Cyber Liability Insurance
There are 2 types of cyber liability insurance:
- First-party cyber liability insurance:
A first-party cyber liability insurance policy covers:
- Notifying the customers about their exposed personal information and purchasing suitable credit monitoring services for all the affected customers
- Investigating the source of the data breach
- Public relation campaigns to restore the company’s reputation after a data breach
- Reimbursing a company for the loss of revenue while handling the data breach
- Paying ransom to cyber extortionists who are holding the data.
- Third-party cyber liability insurance:
These are those types of insurance that pay for the lawsuits arising from the breach of the network of the third party. It covers court fees, damages, and attorney fees.
To mitigate the risks and to redress them, the companies usually take both the first-party liability insurance and third-party liability insurance.
Cybersecurity Insurance
It is an insurance related to the cyber-related offences Insurance provides cover to such cyber crimes and helps in mitigating financial losses as well as litigation costs.
Identity Thefts: Identity theft in simple words means theft of data. It involves procuring, altering, and deleting the personal data stored on the computer. Many business owners take identity theft insurance. This kind of insurance covers the costs that are related to identity theft. It provides for reimbursing the attorney’s fees, administrative expenses and it also provides services to reclaim the lost data.
Cyber Extortion: Cyber extortion is increasing day by day. It is a type of crime where the hackers hold on the information until and unless his demands for the payments are not met. Cyber Insurance does not prevent crime but it helps in the mitigation of the risks. The cyber insurance helps to meet the ransom demands of the extortionist and pay for all the extortion related expenses
Phishing: Phishing means unauthorized access to the password, username, or credit card details of a person. Phishing insurance provides for all the financial losses due to the loss of information. Such kind of insurance also provides for all the prosecution costs.
Privacy and Data Breach: Data breach is an unauthorized disclosure of any information. Insurance for such breach helps in claiming the compensation for breach of such information. It provides for all the expenses and liabilities that arise from any kind of data breach.
Exclusions under Cyber Insurance
Damage to the property by any cyber attack.
- Mechanical failures
- Electrical disturbances and malfunctioning
- Any physical binary de to cyber attacks
- Dishonest or improper conduct of the parties.
Conclusion
Thus with the rise in cybercrimes, there is a need to get insured against such cyber-crimes which will further help in mitigation of losses and will help in regaining it’s lost reputation in the market. Cyber Insurance is a comprehensive insurance policy that covers for first and third party liability and also against various cybercrimes. This type of insurance has worldwide coverage and can be available for events anywhere in the world. Together with cyber insurance and vigilance in the business, a company can become more competitive and this will also attract more investors to the company. Therefore it is important that the companies must have cyber Insurance which is necessary to minimize the losses from any kind of cyber threat and cybercrimes.
References
- Inger Anne Tondel, Differentiating Cyber Risk of Insurance Customers: The Insurance Company Perspective, in AVAILABILITY, RELIABILITY,AND SECURITY IN INFORMATION SYSTEMS 175, 175 (2016).
- Shree Krishna Bharadwaj.H(2016), “Cyber liability insurance in India: Growing importance”, Imperial Journal of Interdisciplinary Research (IJIR) – Volume 2 Issue 1 2016, ISSN: 2454-1362.
- CYBER INSURANCE IN INDIA (2019), Data security council of India
- CYBER INSURANCE , A REFERENCE GUIDE (2017) , Institute of development and research in Banking technology.
- Insurance Information Institute (2015), Cyber risk: threat and opportunity, Insurance Information Institute, New York.
- OECD (2017), “The cyber insurance market”, in Enhancing the Role of Insurance in Cyber Risk Management, OECD Publishing, Paris.
This Article is written by Sakshi Shairwal and Muskan Kapoor an Intern at Sakshar Law Associates. Sakshar Law Associates is a law firm based in New Delhi, India that specialises in Employment, IP and Start up laws. Sakshar Law Associates is headed by Advocate Sakshi Shairwal, who is serving as Additional standing counsel in Muncipal Corporate of Delhi. She is a LLM holder from the prestigious University of Manchester. Her hardwork, dedication and commitment towards her clients and her law firm is creating ripples in the area of legal world.
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