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What is Cyber Insurance? How can it Save You from Cyber Risks?

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While car insurances, home insurances, life insurances, and Mediclaim policies are widely used across the globe, the use of cyber insurance is still in its nascent stage. This is mainly due to unawareness and policy prices. However, as everything nowadays becomes digitalized, it is important to protect your business from cyber threats with the right insurance policy. In this article, you can read about the average cost of insurance for protection against cyber risks and also about measures to reduce the cost and make them more affordable.

What is a Cyber Insurance? How much does it cost?

Cyber Insurance like any other insurance is a contract that you sign with an insurer who provides insurance coverage for cybercrimes and losses that you incur from your network or computer. This insurance usually covers cyber incidents like data breaches and online fraud and others. When you purchase cyber insurance for your business, it usually covers the loss that the company incurs for paying in cases of data breaches and sensitive information of the customers such as account numbers, credit card numbers, and others.

Usually, there are two types of insurance in this field –

1. Cyber liability insurance -

These insurance policies cover small businesses primarily that have limited customer data. Against this type of insurance, the insurance company pays for the expenses to cover the cost of hiring a PR firm, letting all customers be aware of the incident of data breach and also employees and other people related to and affected by the data breach. The insurance policy will also cover the cost of credit monitoring and restoration of the identity of the victims of the breach.

You can also customize this type of policy to suit your business’s requirements. You can include income replacement, extortion payments, and others. The cost of this type of policy is usually lower as the insurance provider has to pay for a limited number of customers/ employees in the small businesses. However, the cost varies as per the coverages you are opting for.

2. Cyber breach insurance -

Big companies have a huge amount of data and the cost of maintaining the same is huge as well. So, for larger companies, you can opt for cyber breach insurance policies which usually pay for customer lawsuits, different fines and penalties, legal insurance, and other costs that the company incurs to restore the identity of the customers. The cost of this type of policy is usually higher owing to the factor that it covers the cost for more customers and larger companies.

The cyber-attacks have increased drastically in the past 2-3 years and so is the premiums for the insurance coverage for cyber threats. On average a corporate cyber policy of Rs. 5 crores will cost you around Rs. 5 lakhs and the premium depends on the type of insurance coverage, coverages you are opting for, and also the sum insured. For instance, you have corporate cyber insurance of Rs. 50 crores, then the premium will be around Rs. 30 lakhs and above as per the current market scenario.

Business cyber insurance costs/ premiums depend on the following factors –

1. Type of business and industry it belongs to:

The first factor that affects the premiums of the policy is the type of business and the industry it falls into. For instance, if you have a business manufacturing consumer durables, where the primary work is manual production of the items, the cost of an insurance policy for cyber threats will be comparatively lower compared to an IT business or a financial or banking institute. This is because an IT business or a financial organization has their primary businesses online, using the internet connection, computers which are targeted by the cybercriminals more than the data of a manufacturing company. The probability of data breach or other cyber incident is more in the IT industry, and financial and banking industry than in the manufacturing industry. Thus, the cost of cyber insurance is also higher for the IT or the banking industry.

2. Company’s size:

The next factor is the size of the company. If a small-scale IT firm is there buying a cyber-insurance policy and on the other hand a popular large manufacturing company is buying the same policy, then the premium will be higher for the latter. This is because bigger companies mean more data, more customers, and more liability.

3. Amount of sensitive data and nature of data:

If your business stores data related to the stock of the products you have in your warehouse more than the data of the customers, bank details, and other sensitive information then you can buy lower coverages as well and then your premium will be lower as well.

4. Coverage level:

This is very basic that with the increase in the coverage level, the premium will go up as well and vice versa.

How you can minimize the cost of cyber insurance policies?

You can minimize the premium of cyber insurance for your business by following the steps below –

1. Firstly, you need to hire a tech or IT company to do a penetration test which will help you understand how much your systems are vulnerable to cybercriminals.

2. Then maintain a strict data encryption process for all sensitive data. You need to make sure that the encryption key for the data is having limited access and is safe always.

3. Create two-factor authentication for log-in and you can even use multi-factor authentication as well.

4. Finally, you need to train your employees to maintain the privacy and importance of the preservation of data and information. Also, you need to train them for the same and most importantly, limit the number of people having access to sensitive data and information of the business.

Conclusion

Every business has a lot of data and information related to their production, customers, business practices, financial statements, business plans, and whatnot. All the information is crucial and loss of this information can lead to huge losses. To protect the business from this type of loss incurring due to cyber-attacks, cyber insurance can be a huge relief. Like every insurance cyber insurance also has price tags on it but with the rise in cyber-attacks, having a cyber-insurance policy in place is becoming a necessity for businesses day by day.

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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