By Manoj Rane, Senior Vice President Placement & Underwriting (Liability Lines), Alliance Insurance Brokers
Cyber insurance is a rapidly expanding segment within India’s insurance industry. According to recent reports, the domestic cyber insurance market is currently valued at a modest USD 50-60 million but is poised for significant growth. The sector has demonstrated a robust CAGR of 27-30% over the past three years, and this upward trajectory is expected to continue in the coming years.
With rapid digitization across sectors like finance, banking, healthcare, IT, pharma, e-commerce, manufacturing and the ones integrated with holistic economic sectors like retail, supply chain, there will be an increased need for cyber insurance in the country in the years to come. With these sectors becoming the early adopters of cyber insurance; there will be more sectors in the coming years, which will opt for cyber insurance for the protection of their data.
The vulnerability of the healthcare sector to cyberattacks was starkly highlighted in 2023 when AIIMS Delhi suffered a cyberattack that resulted in server downtime and disruptions to essential health services. This incident highlighted the critical need for robust cybersecurity measures to safeguard sensitive patient data. The potential compromise of patient information during the attack emphasized the severe consequences of such breaches.
In India, the trajectory of cyber insurance market will be shaped by three key factors: accelerated pace of digital adoption by businesses, government’s push towards digitalization and stricter cyber laws, and the increasing competitive landscape as technology giants and multinational corporations enter the market.
It is thus important for companies today to understand the basic advantages of cyber insurance. Primarily, it covers first-party losses resulting from data breaches, including data destruction, hacking, extortion, and theft. Additionally, policies often include coverage for legal expenses incurred in the aftermath of a cyber incident. While specific coverages can vary between providers and plans, core areas typically protected by cyber insurance include:
Customer notification costs: In the event of a data breach involving the loss or theft of personally identifiable information (PII), companies are legally obligated to inform affected customers. This process can be costly and time-consuming. Cyber insurance policies often include coverage to help businesses offset the expenses associated with customer notifications.
Ransomware attacks, where cybercriminals encrypt an organisation’s data and demand a ransom for its release, are a significant threat. Cyber insurance policies can provide financial protection to cover ransom payments. However, it is important to note that government agencies often advise against paying ransoms as it can incentivize further cybercriminal activity.
Insuring legal support: Cyber insurance policies often include coverage for legal expenses incurred due to privacy policy violations or regulatory breaches following a cyberattack. Additionally, these policies can help fund the hiring of cybersecurity experts or computer forensics specialists to investigate the incident, recover compromised data, and implement measures to prevent future attacks.
Identity restoration: Cyber insurance policies often provide coverage for identity restoration services. This benefit helps organisations assist affected customers in rebuilding their personal identities after a data breach.
Data recovery is often covered by cyber liability insurance policies, providing financial protection for businesses to restore data compromised in a cyberattack. It also covers the costs associated with repairing computer systems damaged in a cyberattack.
With the world moving towards data and technology and our identities becoming synonymous with our mobile numbers, cyber protection is the next leap for all individuals, as well as companies. There will come a time, when countries need to be protected against cyber terrorism and insurance will play a supreme role. With more and more use of data, the risk of cyberattacks against applications, devices, networks, and users are growing, significantly impacting businesses, from losing customers to the loss of reputation and revenue.
It is high time for companies to understand that cyber insurance is not an expense anymore, it is a strategic investment. The dynamic cyber insurance industry and its vast expanse of coverage has been designed to meet the increase in cybercrime today. And businesses must see the proper coverage of cyber insurance as critical.
