By: Yogesh Agarwal, Founder and CEO, Onsurity
The Reserve Bank of India’s recent report sheds light on the escalating challenges faced by the financial sector, documenting over 13 lakh cyber-attacks between January and October 2023. Businesses of all sizes find themselves at an increased risk, with a 15 percent weekly rise in cyberattack cases on average, positioning India as the second most targeted nation in the Asia Pacific region, according to cyber security firm Check Point.
As the digital terrain expands, so does the vulnerability of small businesses. Cyberattacks on these enterprises have surged, fuelled by the rise of remote work and third-party contractors. Unlike their larger counterparts, small businesses often lack robust security measures, making them prime targets for cyber adversaries. As technology becomes integral to operations, the potential risks associated with cyber incidents have never been higher. Now, more than ever, small businesses must prioritise cyber insurance to safeguard their core operations and financial well-being.
A cyber insurance policy acts as a financial safeguard in the wake of privacy or security breaches. Beyond just mitigating financial losses, it plays a crucial role in facilitating the recovery process. This includes allocating resources for essential elements such as legal support, investigative services, crisis communication experts, and forensic analysis. In essence, it provides a comprehensive safety net, not only addressing monetary concerns but actively supporting the necessary steps to rectify the damage caused by cybersecurity challenges.
Why cyber insurance is a must for small businesses?
Micro, small, and medium enterprises (MSMEs) stand as a formidable force in India, with a staggering count of 633.9 lakh. More than 99 percent of these enterprises belong to the micro-enterprise category, reaching a substantial 630.5 lakh. Given that these enterprises serve as the backbone of the economy, the rising tide of cyber threats accentuates the critical necessity for robust protection. Furthermore, with the rules proposed in the Digital Personal Data Protection (DPDP) Act, businesses face a compelling need to reassess their data storage and usage practices. Should these regulations solidify, they will not only prompt a thorough review but will also propel businesses towards making essential investments in best practices, emphasising the pivotal role of securing a robust cyber insurance policy in this evolving digital age.
Protect personal data: Businesses handling personal data must comply with data breach laws. Cyber insurance provides financial assistance in the event of a breach, covering the costs of legal help, investigators, and crisis communicators.
Technology dependency: In an era where businesses heavily rely on technology, any disruption could lead to significant setbacks. Cyber insurance acts as a safety net, mitigating the effects of technology-related disruptions.
Rising breach costs: According to IBM Security’s Cost of Data Breach Report, the average cost of a data breach in India reached an all-time high of Rs. 179 million in 2023, marking a nearly 28 percent increase since 2020. A cyber policy effectively helps mitigate these rising expenses.
Contractual obligations: Many business contracts now require cyber insurance as a crucial element. It’s not just a recommendation; it’s a must for fostering and maintaining business relationships.
Comprehensive incident response: Cyber policies offer a ready-made incident response plan, providing access to expert vendors in legal guidance, IT forensics, consumer notification, and public relations.
Board’s accountability: With cybersecurity becoming a focal point, the board of directors is increasingly accountable for company-wide security. A cyber insurance policy reflects diligent oversight.
What does a cyber insurance policy cover do?
Embarking on the intricate journey through cybersecurity, a cyber insurance policy surfaces as a necessity for small businesses. This holistic shield extends far beyond financial protection, incorporating a spectrum of crucial components including:
Legal costs from cyber incidents: In the aftermath of a cyber incident, the legal ramifications can be significant. Cyber insurance shoulders the burden of legal costs, ensuring that your business has the necessary legal support to navigate complex regulatory frameworks and potential lawsuits.
Cyber extortion/ransom amounts: As cyber threats evolve, the spectre of ransomware looms large. Cyber insurance provides coverage for cyber extortion or ransom payments, allowing businesses to address such incidents without crippling financial consequences.
Fixing compromised data: When a breach occurs, the restoration of compromised data is a critical aspect of recovery. Cyber insurance covers the costs associated with fixing and restoring data integrity, helping businesses regain control over their sensitive information.
Managing public relations: The aftermath of a cyber incident can impact a business’s reputation. Cyber insurance includes provisions for managing public relations and ensuring businesses can communicate transparently and effectively with their stakeholders during a crisis.
Support for identity restoration: Cyberattacks often involve the compromise of personal or corporate identities. A comprehensive cyber insurance policy provides support for identity restoration, helping affected individuals or businesses navigate the process of reclaiming their identities.
Handling legal expenses: Legal complexities arising from cyber incidents can be overwhelming. Cyber insurance not only covers legal costs but also provides assistance in handling legal procedures, ensuring that businesses have the necessary expertise to address legal challenges effectively.
Paying fines from investigations: Regulatory bodies may impose fines and penalties in the aftermath of a cyber incident, especially if there are compliance breaches. Cyber insurance steps in to cover the costs associated with regulatory fines, alleviating the financial burden on businesses.
Compensation for lost profits during disruptions: Cyber incidents can disrupt normal business operations, leading to financial losses. Cyber insurance provides compensation for lost profits during these disruptions, offering a financial safety net to help businesses weather the storm and resume operations smoothly.
Awareness around cyber insurance is gradually improving, given the nature and volume of cyber threats. In a world full of online risks, small businesses need to be proactive in protecting themselves from cyber threats. Cyber insurance isn’t just a must-have; it’s a crucial strategy. It not only provides financial safety but also ensures that businesses can keep running smoothly and gives them peace of mind. In a time where the digital future is highly uncertain, it becomes the key for small businesses to stay safe and prepared while focusing on performing better.
