Cyber Insurance: All You Need to Know

Posted on: Apr 4, 2022 | 3 mins | Written by: HDFC ERGO Team

Cyber Insurance: All You Need to Know

For the past couple of years, cyber-attacks and security breaches have become more common. In fact, high-profile data breaches are now almost a common occurrence. Individuals, businesses, workplaces, and other facilities continue to face significant risks online — especially in this day and age when the threat of hacking undermines everyone's privacy and security. This is exactly where cyber insurance coverage comes in clutch!

What is Cyber Insurance?

Cyber insurance coverage is a sort of insurance plan that shields businesses from the consequences of cyber-attacks. It supports a business in limiting risk vulnerability following a cyber-attack by setting operating costs. In other words, cyber insurance coverage is designed to pay the charges, expenses, as well as legal costs associated with cyberattacks that happen after a company has been hacked or compromised and there has been significant loss or theft of customer and staff data. Basic cyber risk insurance coverage is meant to protect organisations from cyber-crimes like ransomware, malware, and DDoS attacks. Costs associated with privacy investigations or lawsuits following an attack may also be covered in the insurance claims.

What is included in Cyber Insurance Policies?

Cyber insurance policies can be divided into two broad categories namely,

● First-Party Liability

● Third-Party Liability

1. First-Party Liability:

● E-Theft Damage as a result of having transferred finances or property or supplied anything of worth as a result of false data entered into software over an online network or manually.

● E-communication Loss incurred as a result of a client transferring dollars or property or delivering any service based on a false communication, for which your company is legally accountable.

● E-Threat Loss, which includes the expense of an expert negotiator as well as any payment provided or any cash or asset surrender meant as an extortion pay.

● Loss due to e-vandalism, even if perpetrated by an employee.

● Interruption of E-Business, including Additional Expenses

● Expenses associated with privacy notification, such as the expense of credit monitoring or equivalent services for impacted clients. (The expenses are subject to a restriction.)

● Expenses associated with a crisis, such as the fees charged by public relations specialists. (The expenses are subject to a restriction.)

2. Third-Party Liability:

● Disclosure Liabilities, including consumer claims, come from system security flaws that allow illegal access to or publication of private data online.

● Reputational Liabilities, includes claims for product or service disparagement, slander, libel, defamation, as well as privacy invasion.

● Content Liabilities includes claims for violation of personal property, trademarks, and copyrights.

● Conduit Liabilities includes claims originating from network security breaches that cause harm to any third-party network.

● Impaired Access Liabilities, which includes claims stemming from system security failures that cause systems to be inaccessible to consumers.

● Defence Costs includes expenses racked up in defending claims brought by any government agency, licencing or regulatory organisation.

● Extradition procedures are included in the scope of claims.

What is not included in Cyber Insurance Policies?

Just like any other insurance policy, cyber insurance plans also carry some pre-defined exclusions. Here are some of the common exclusions:

● Advance notification of an event or scenario that your previous insurance provider has acknowledged.

● Information of one Insured Individual is not attributed to any another individual, and only information acquired by the Institution's CEO, CFO, or COO is attributed to the Company.

● A policyholder fraudulent act or deliberate breach of any such rule or regulation.

● Any bodily harm, sickness, illness, or death, as well as any loss of tangible assets.

● Mechanical failure, degradation over time, electrical disturbance, media malfunction, breakdown, or any other similar issue.

What are the Benefits of Cyber Insurance Policies?

The benefits of cyber insurance plans include:

1. Third-party (cyber liabilities) as well as first-party (cybercrime expenditure) coverage is combined under a single cyber insurance policy.

2. Cyber Insurance provides broad definitions of terms "computer" and "network" which includes laptops, disc drives, backup recordings, as well as mobile devices, which are all exposed to business networks.

3. Employees are not exempt from liability for fraudulent or harmful behaviour.

4. Outsourced data and information collection and analysis services are also covered by Disclosure Liability under cyber insurance coverage.

5. Coverage for privacy notification expenditures is triggered without the need for an insurance claim or a legal obligation necessitating the notice.

6. Incidents of cyber hacking, as well as cyber assault, are covered.

Conclusion:

In essence, cyber insurance policies work by providing coverage for expenses caused by a cyber-attack. In other words, if one of your clients accuses you of a violation of security protocols, you may need to cover forensic fees or litigation in court. A good cyber liability policy should provide long-term benefits and will be beneficial in all aspects of your business. It's no doubt we live in a digital-driven economy where information is the lifeblood of business. As more digital innovations continue to transform daily life, so too will security breaches and cyber-attacks grow in frequency. So be sure to protect your firm with the best cyber liability insurance policies available to safeguard against the problems that may arise from any future technological security difficulties.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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