Ways to Lower Your Cyber Insurance Policy Premiums

Posted on: Sep 23, 2022 | 3 mins | Written by: HDFC ERGO Team

Ways to Lower Your Cyber Insurance Policy Premiums

Any business that has some online presence is not immune to cybersecurity risks. Even more during recent times, when there are regular reports of data breaches. And the cost of these data breaches is also on the rise. Thus, it should not come as a surprise that the demand for cybersecurity insurance is increasing. Here are all the details regarding cybersecurity insurance and how to keep the premiums of your policy down, by taking a few simple measures.

What is Cybersecurity Insurance Policy?

Cyber insurance is just like any other insurance policy, where you pay a premium to protect an asset against something bad happening. In this case, the policy has your back in the event of data breaches. These policies are sometimes known as data breach insurance policies or cyber liability policies. And they primarily aim to help you or your organization recover data in the event of a network outage, data breach, and interruption of services or any other cyber issues.

There is a lot of encouragement for buying cyber insurance in a bid to reduce the total number of cyber-attacks. This can be achieved by adopting a few preventive measures to protect against data breaches and/or implementing some of the best practices on top of the protection that an organization already has.

Should You Buy Cybersecurity Insurance?

According to some reports, the average cost of a data breach has been constantly going up. For example, the average cost of a data breach stood at $3.86 million for the year 2018, which was a 6.4% increase from the previous year. Similarly, the cost of each stolen piece of information, records or confidential information was $148, which was a 4.8% increase from the previous year.

A data breach can happen with any organization, be it a big business or a small business. It can happen due to hacking, crypto mining, the presence of malware, or other notorious activities. If something like this happens, it can impact the business in the following ways.

● Results in a downtime of the business

● Penalties, fees, and compliance-related issues

● Might result in loss of business

● Might lead to a loss of reputation for the business

● Involves cost related to investigation and resolution for the same

Cybersecurity Coverage

The coverage for a cybersecurity policy largely depends on the type of policy that you choose and your insurance provider. You can primarily choose between first-party policy and third-party policy.

The first-party policy usually covers losses and provides reparations for issues such as damages or loss of digital assets, business opportunities that are lost due to cybercrime, and cyber extortion.

The third-party policy usually offers coverage for companies that are involved with networks, systems, and software for the data of other organisations. These plans usually cover the cost of personally identifiable information (PII) and expenses related to customer notification.

A small fraction of the policies offer coverage for physical damages or bodily injuries that arise due to cyberattacks on critical infrastructures.

Is Cybersecurity Policies Expensive?

There is no hiding the fact, that cybersecurity policies are not cheap by any margin. Since the risk involved is relatively higher, the insurance companies charge a hefty premium for the coverage that they offer. Also, there isn’t enough objective data that insurance providers have access to, to decide the cost of data breaches.

Another reason for the premiums to be high is that data breaches almost always result in very high payouts. And the industry that you are in also plays a crucial role. For instance, organisations in the financial or health care domain face steeper insurance premiums. This is because they hold sensitive user information and these are of greater interest to the bad players.

How To Lower The Cost Of Cybersecurity Insurance Premiums?

Unlike a few other insurance policies, there are no easy or direct ways of reducing the policy premium of cyber insurance in India. For example, installing security devices on your vehicles can help you get a discount on your vehicle insurance policy. However, for cybersecurity insurance, you can follow some standard practices. These will lower your risk profile and that might result in lower insurance premiums.

The actual cost of the policy would depend on a myriad of factors such as the industry that you are in, the size of your organisation, the insurance provider that you are dealing with and your annual revenue, among other things.

Here are some of the measures that you can carry out to lower the cost of cybersecurity policy premiums.

1. Regular Penetration Testing

By conducting regular penetration testing on your systems, you increase the chances of finding out any vulnerabilities in the system. These vulnerabilities usually lead to data breaches. For insurance providers, this reduces the risk for a customer.

You can either set up an internal team to carry out penetration tests or take the help of trusted security partners to carry out such assessments on your system.

2. Encrypt Sensitive Data

You must encrypt all sensitive data, irrespective of whether it is in transit or at rest. And even more important is to keep the encryption key safe and ensure that only trusted entities have access to it.

3. Strong Password Policy

There are a few insurance providers who might not even offer a policy if you do not have a strong password policy in place. Standard practices recommend having passwords that are at least 8 characters long and do not contain words that are part of the dictionary. A combination of letters, numbers and special characters is one of the better ways to go.

4. Number of Records in Use

A key factor that decides the cost of your cyber security policy is the number of records that you transfer, store or access regularly. Controlling the number of records that you access regularly is an easy way to keep the policy premiums down.

5. Reach Out To An Existing Insurance Provider

If you already have other policies from an insurance provider, you might as well reach out to them and discuss your cybersecurity insurance needs. You might get a discount from them since you already have policies with them.

Conclusion

Though it is still in its early stages, cyber insurance in India is picking up. There is a constant threat of data loss and its integrity that companies face. And it is even more prominent for some of the industries that hold sensitive user information. With the help of cybersecurity insurance, companies can reduce their risks and losses related to data breaches. For complete peace of mind, you can follow the above standard practices and buy a cybersecurity policy.

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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