Why Do You Need Cyber Liability Insurance?
The Problem
In today's digital age, businesses increasingly rely on the Internet for their operations. However, this heavy dependence on digital platforms exposes them to significant risks, such as cyberattacks and data breaches. The financial impact of these incidents can be devastating, leading to substantial losses and operational disruptions. Many companies struggle to fully protect themselves against these threats, leaving them vulnerable to financial and reputational damage.
The Solution
To ensure robust protection in the online sphere, comprehensive cybersecurity measures are essential. One key component of this strategy is cyber security insurance. It plays a crucial role in safeguarding businesses by providing financial protection aga. It plays a crucial role in safeguarding businesses by providing financial protection against the consequences of cyber incidents, allowing them to focus on their core operations without constant concern about potential cyber threats.
What Happens If Your Business Lacks Cyber Insurance?
Not having cyber insurance can expose businesses to severe risks, including:
- Breach Expenses: Companies may face steep costs from data breaches, including legal fees, customer notifications, and regulatory fines.
- Ransomware Costs: Businesses might have to cover ransom payments or data recovery expenses on their own.
- Revenue Loss: Cyber attacks can disrupt operations, causing downtime and lost income that can strain financial resources.
- Trust Erosion: A cyber incident can damage customer trust and tarnish a business’s reputation.
- Data Loss: Critical data may be lost permanently during a cyber attack.
- High Recovery Costs: Post-incident recovery often requires costly expert assistance.
- Operational Disruption: Cyber incidents can cause significant downtime, disrupting business relationships and affecting partners and customers.
Who Needs Cyber Insurance Coverage?
There's been a myth floating around that only big corporations or tech giants need cyber insurance. But, that's not the case - it's for anyone who wants to protect themselves from the headaches and financial hits of cyber attacks. So, who needs it?
Well, in today’s interconnected world, pretty much anyone who uses the internet, handles sensitive data, or relies on digital systems to keep things running smoothly. Whether you're a bank, a tech company, an NBFC, or a healthcare provider, your information is a prime target for cybercriminals. And schools and small businesses are just as vulnerable.
Therefore, whether you operate an MSME, manage a large corporation, or run a startup, cyber security insurance is a must for you to safeguard your digital initiatives and ensure continuity in an ever-evolving landscape.
How Does a Cyber Liability Insurance Policy Work?
Cyber insurance, a type of Liability Insurance, provides financial protection to organisations if a cyber-related incident occurs. After assessing their cybersecurity risks, organisations purchase a policy tailored to their needs and budget.
In the event of a cyber incident, such as a data breach or cyberattack, the organisation reports the incident to the insurer and initiates the claims process. If the claim is approved, the insurer provides financial compensation to cover the costs incurred up to the policy's coverage limits. This assistance enables organisations to recover from cyber incidents more swiftly and effectively.
What is Covered Under Cybersecurity Insurance?
Here are the common coverage provided under a corporate insurance policy:
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Cyber liability insurance provides coverage for the following conditions:
First Party Costs
- Business Interruption: The cyber insurance policy covers financial losses incurred due to interruptions in normal business operations caused by cyber incidents.
- Breach Costs: It provides coverage for expenses associated with responding to and recovering from a data breach, including forensic investigations, notification of affected individuals, credit monitoring services, public relations efforts, and legal fees.
Third-Party Costs
- Privacy and Network Security Liability Protection: A cyber policy protects the insured against claims and legal liabilities arising from privacy or network security breaches.
- Multimedia Liability: It covers claims of defamation, libel, or copyright infringement related to multimedia content produced or distributed by the insured.
- Reputational Liability: The cyber insurance policy addresses damages to the insured's reputation resulting from cyber incidents.
- IPR Infringement: It protects against claims of intellectual property rights infringement related to online activities or digital assets.
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The cybersecurity insurance does not provide coverage for the following:
- Bodily injury, diseases, death or damage to any tangible item is not covered
- Power disruption, mechanical malfunction, equipment failure, or media breakdown resulting in any form of loss.
- Any intentional or deceitful action by the insured that violates a law, rule, or regulation.
- Damages caused due to negligence or lack of precautions to safeguard information such as credit and debit cards, bank accounts, internet connections, etc.
- Deliberately ignoring any knowledge or circumstances that may become the basis of a claim
- Ongoing legal proceedings before the policy was purchased
- Unexplained loss, or any loss due to a government order
- Losses due to participating in any malicious or dishonest activity
- Breach of trade secrets, trademarks, registered patents, actual or alleged plagiarism, copyrights or other intellectual property
- Consequential loss or damage is not covered, including the loss suffered by any third party
- Any legally uninsurable matter
- Loss in value, theft or disappearance of cryptocurrency is not covered
- Loss of any tangible property
- Purchase of sovereign funds, dealing in securities, federal funds, foreign exchange, currencies and commodities are not covered
How to Raise a Claim for Cyber Insurance in India?
Follow these steps to initiate a claim under Cyber Insurance in India:
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Notify Your Relationship Manager
Promptly inform your relationship manager of any cyber incident.
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Assignment of Investigator
An investigator will be appointed to examine the incident and create a temporary resolution plan.
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Hiring of Cyber Expert
In cases of severe incidents, a cyber specialist is enlisted to conduct an impartial analysis, ensuring transparency and impartiality.
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Internal Liaison
All concerned parties, including the insured, engage in discussions about the resolution. The insurer consults the policyholder on potential costs for losses, and if a cost-effective option is identified, it is pursued. Then, a final action plan is developed.
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Reporting
All details are documented and reported to the claims team. They will then review the information for final approval, after which the claim amount gets disbursed.
Note: It is the responsibility of the insured not to withhold any information which the insurer may deem relevant to be shared for a claim. Failure to comply may lead to either denial of the claim or delay.
What Are the Best Practices for Strengthening Your Business's Cybersecurity?
Here are a few best practices to keep your business secure and protected from cyber threats:
- Enhance Network Security: Set up firewalls, continuously monitor network traffic, and deploy antivirus solutions to safeguard your systems.
- Update Software Consistently: Regularly update all software, operating systems, and security patches to protect against potential threats.
- Provide Employee Training: Offer ongoing cybersecurity training to employees, focusing on phishing prevention and secure password practices.
- Implement Robust Access Controls: Enforce multi-factor authentication and restrict access to sensitive information based on user roles.
- Maintain Regular Data Backups: Regularly back up essential data to secure, offsite locations to ensure quick recovery in case of a cyber incident.
Cyber Insurance: FAQs
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Ans: Any startup or a well-settled organisation looking to protect the company’s data that is stored online should purchase a cyber risk insurance policy.
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Ans: Yes, cybersecurity insurance is effective in providing financial protection and assistance in the face of cyber-related incidents. It helps reduce the financial losses linked with data breaches, cyberattacks, and other cyber threats, facilitating businesses' quick and efficient recovery.
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Ans: Cyber security insurance coverage encompasses various facets of cybersecurity risks and occurrences. It typically covers financial losses, legal expenses, notification costs, forensic investigation expenses, and costs associated with data recovery and system restoration.
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Ans: While cyber insurance is not obligatory in most jurisdictions, it is highly advisable for businesses of all sizes and industries. Although not mandated by law, cybersecurity insurance can provide valuable financial protection and support during cyber-related incidents.
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Ans: The absence of a cyber insurance policy in India poses significant risks, including financial losses, reputational harm, legal liabilities, and business disruptions arising from cyber-related incidents. Without a commercial cyber insurance plan, businesses may face substantial financial burdens associated with data breaches, cyberattacks, and other cyber threats, as well as the costs of regulatory fines, legal fees, and potential lawsuits. Moreover, businesses may struggle to recover from cyber incidents and rebuild trust with customers and stakeholders without the support provided by cyber insurance.
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Ans: Insurers recommend using effective cyber security measures when purchasing a cybersecurity insurance policy to get better coverage in case of a cyber breach. They may conduct inspections to assess the effectiveness of the security measures implemented by the company to protect its online data.
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Ans: Yes, cyber insurance does provide coverage for copyright infringement or trademark infringement.
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Ans: Yes, in case the date of the company’s customer gets leaked on the internet, then the insurer will provide cover for it.
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Ans: Privacy risk, operational risk, service risk, and security risks are the four prominent risks that cyber liability insurance covers
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Ans: Yes, there is an insurance policy for cyber-attacks, known as cyber security insurance. It protects your business against losses caused by cyber-attacks.
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Ans: Cybersecurity insurance premiums can depend upon many factors, such as the company’s services, type of data stored online, PII and PHI records, network security, privacy policies, annual gross revenue, how much exposed a company is and more.
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Ans: Cyber security insurance companies started offering first-party coverage in the mid-2000s.
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Ans: The better security measures a company takes, the lower the premium amount for the opted cyber insurance plan will be.
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General liability insurance provides coverage for bodily injuries or damaged properties resulting from services, operations or products, whereas cybersecurity insurance solutions provide coverage for online cyber threats. That’s why cyber liability coverage is excluded from the general liability insurance policy.
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Ans: As an insured, you can raise a claim for all the cyberattacks however, whether the insurer will provide cover for multiple cyber attacks will depend on the selection of coverage and sum insured that you have opted for while purchasing the cyber insurance plan.
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Ans: No, there is no sub-limit, deductible or waiting period under the cyber insurance online policy.
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Ans: Usually, a cyber insurance policy comes with a tenure of 1 year and the insured has to renew the policy before the expiration date to keep getting the coverage.
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Ans: Yes, you can create your own cyber insurance plan. You can choose the coverage you want, the sum insured according to your needs, and, if you want, add any of the available add-ons.
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Ans: Corporate cyber insurance policies secure an organisation’s confidential data, programs, and networks from unauthorized access and exploitation. They protect against financial losses, economic costs, legal consequences, and reputational damage resulting from failures in the organisation’s information technology systems.
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Ans: Third-party liability in cyber security insurance covers claims made against a company by individuals or entities affected by a cyber incident. This type of coverage protects the insured organisation when it is held responsible for damages to third parties, such as customers, partners, or other external entities.
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Ans: Yes, a previous cyber insurance claim can impact your current premium and future claims. Insurers often consider your claims history when determining premiums and a history of claims can result in higher premiums.
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