Cyber Security Insurance: Is it Worth Your Investment?

Posted on: Apr 19, 2024 | 3 mins | Written by: HDFC ERGO Team

Cyber Security Insurance: Is it Worth Your Investment?

India is moving towards becoming a digital society and economy. As of 2023, the country has the second-largest internet population worldwide, with over 1.2 billion users.

Digitisation helps students, professionals, and entrepreneurs access content better and connect with a large audience. With such widespread adoption of digital platforms, cyber security is a factor every internet user should consider.

Cybercrimes are on the rise. In 2023, India saw 129 cybercrimes per lakh population. Most of these cases involve online fraud related to customer care, refunds, and KYC.

Cybersecurity insurance can help overcome these challenges. It can protect you against any financial or reputational damage you may incur from a cybercrime.

What is cyber insurance, and why is it important?

Cyber insurance is a plan that provides coverage against cyberattacks. Individuals and businesses alike can invest in this type of insurance.

Let us consider an example. You are a business selling electronic products online. A cyberattack like ransomware or malware could bring part or all of your business operations to a standstill.

You may incur financial losses in the form of downtime, lost sales, investigation, and regulatory fines. With cyber insurance in place, the insurer could cover some of these financial losses.

The digital world has become an integral part of our routines. We spend time surfing online, on social media, and on OTT platforms. We make digital payments, whether for groceries at the local store or an expensive laptop online. There is no escaping the internet, so we should do better at protecting ourselves in this virtual space.

What is covered by cyber insurance?

Here is what a typical cyber security insurance plan may cover.

• Theft of funds: Any financial loss you may incur due to a cyberattack while making digital payment transactions.

• Identity theft: If your identity is misused on the internet, the insurance may cover the financial loss and psychological consultation costs.

• Cyberbullying: If you are a victim of cyberbullying or stalking, legal and psychological consultation costs may be covered.

• Online buying and selling: If you are a buyer dealing with a fraudulent website or a seller dealing with a dishonest buyer, any financial losses incurred during these transactions may be covered.

• Cyber extortion: If you had to pay ransom to resolve a cyberattack, the financial loss may be covered with insurance.

• Hardware replacement: Insurance may cover the cost of replacing your device or components affected due to malware.

• Third-party liabilities: As a business, you are responsible for protecting your customers' and partners' sensitive data. A data or privacy breach can result in third-party claims. Insurance may cover the legal costs arising from such third-party liabilities.

What is not covered by cyber insurance?

Here are the typical exclusions that you may find in cyber insurance policies.

• Deliberate cyberattacks: If the insured intentionally initiates a cyberattack or works with a cybercriminal, such losses will not be covered.

• Potential future losses: A company's brand reputation can take a hit after a cyberattack. One may lose out on potential partnerships and sales. These financial losses may continue down the years and are not covered by insurance.

• Cost of upgrading cyber security: After a cyberattack or the introduction of new technology, you may want to upgrade your cyber security policies. The insurer will not cover such infrastructure upgrade costs.

• Unauthorised websites or practices: If you were on a restricted or unauthorised website or were involved in practices like gambling, the resulting financial losses are not covered.

Who should invest in cyber insurance?

Here is who should consider buying this type of insurance.

• Students

As a student, you will spend a lot of time studying, looking for educational material, researching, and making payments online. Insurance will help protect your identity and allow you to make safe digital transactions.

• Shopaholics

If you are big on online shopping, you may regularly give out your personal and financial details. Data and privacy breaches are significant concerns. This insurance can help you manage your online shopping risks.

• Entrepreneurs and working professionals

Cyber insurance for entrepreneurs and working professionals has become necessary in today's digital era. You consistently deal with sensitive data, making you an attractive target for cybercriminals. An insurance plan can help mitigate these risks.

Conclusion

With rapid digitisation comes the threat of cyberattacks. These attacks are rising in numbers and complexity. Cyber security insurance can protect you against these threats. It provides coverage against issues like identity theft, privacy and data breaches and third-party liabilities.

Ask the insurance company for customised plans for well-rounded coverage.

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

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