Introduction: The Real Cost of Cyber Attacks
Cyber attacks in India have been reported to be 1.39 million for 2022. Indeed, it is a gravely increasing threat that has failed to end and has resulted in irreplaceable damage to a myriad of organizations, be it in terms of reputation or monetary damage. Take the case of IndusInd Bank, which was subjected to the heavy blows of a cyber attack in 2021, losing millions in direct loss and having a severe dent in customer trust. Most small businesses won’t be as lucky as the bank. Given the endless fight against cyber threats, cyber insurance plays a crucial part in risk management undertaken by companies as protection against such incidents as data breaches or attacks by ransomware, amongst others.
This increases the threat to companies, so cyber insurance is no longer a choice but a necessity. With India ranked in third position in global cyberattacks, the stakes have gone even higher. The Digital Personal Data Protection Act 2023 has provided high penalties for data breach up to INR 250 crores (INVEST INDIA).
Why Cyber Insurance?
Financial Protection Against Cyber Losses:
Cyber incidents cause significant losses in terms of money, not just in terms of operational disruption but, even more importantly, due to fines levied by regulators. A ransomware attack can halt operations, and a data breach can demand costly legal and public relations exercises. By 2022, the average cost of a data breach in India stood at INR 17.6 crore, which proves to be a significant blow for any business.
Cyber insurance is a safety net and is used for expenses such as:
- Legal fees
- Data restoration costs
- Losses from business interruption
- Customer notification costs
Compliance with Regulatory Requirements:
The DPDP Act 2023, among other data protection laws, regulates businesses handling sensitive personal data; non-compliance will attract heavy fines in case of an infringement. Cyber insurance covers not only monetary value but also other resources and services that would provide compliance and risk of penalty/
Protection of Reputation:
Cyber breach can dilute an organization’s brand name overnight by losing the customers’ trust. In 2020, the Indian e-commerce company BigBasket faced a data breach in which millions of users’ records were stolen. It left fear among all the customers, which affected the company’s brand name. Cyber insurance reduces the blow by managing PR costs and providing crisis management services that speed up recovery.
Support for small and medium-sized enterprises:
(SMEs) are especially vulnerable to cyberattacks. They need a robust cybersecurity infrastructure. Such businesses serve as the lifeline to SMEs. Cyber insurance provides financial support in case of an attack. For instance, if it attacks an SME with ransomware, the policy will cover the ransom, legal fees, and other costs associated.
Types of Coverage
Cyber insurance policies typically offer coverage across four primary areas:
- First-party loss: These include costs directly incurred by the business, including business interruption, data recovery, and mitigation expenses
- Third-party liability: This includes legal liabilities from a data breach affecting customers or third parties.
- Regulatory fine: Policies cover fines imposed by regulators like the DPDP Act for non-compliance
- Cyber crisis management expenses: These include public relations and reputation management costs, ransom payments, and cyber extortion.
Case Study: The Power of Cyber Insurance
One can take the example of SBI in 2019, where the bank faced data breaches showing millions of customers’ financial details. Costs incorporated by these include rectification, the cost of informing customers, legal fallout, and so on, which is enormous.
Although SBI did take care of it, many small enterprises would have gone bust if such pressure had been on them. Cyber insurance in such a scenario is something like that inevitable cover for these often-underestimated costs.
Current Scenario of Cyber Insurance in India
Cyber insurance in India is still growing at around $50–60 million, and its annual growth scope also remains at 27–30%. (Invest India)
The increased availability of digital services in the financial, health, and IT sectors has made businesses vulnerable to cyber risks. This has become the need for insurance. But most of the companies, particularly small-scale entities, tend to consider cyber insurance an unnecessary expense instead of a necessary investment.
Government Initiatives and Developments in Cyber Laws
India’s legal regime, too, is evolving to support cybersecurity protection. The Digital India Act 2023 will help streamline and consolidate digital legislation and guidelines, thus preparing a firmer ground for industries.
Government initiatives like Cyber Swachhta Kendra and the Indian Cyber Crime Coordination Centre (I4C) are working towards improved cyber hygiene across the nation. These efforts complement cyber insurance and strengthen businesses against cyber attacks.
Future of Cyber Insurance
The future of cyber insurance will look very different with AI-driven cyberattacks and deepfake technologies. As more widespread digital infrastructure takes hold, businesses’ investment in cyber insurance is inevitable to ensure business continuity. More customized cyber insurance will be witnessed, as, for instance, tailored policies according to business needs and industry-specific risks hold the market, and such will provide complete coverage.
Conclusion: Why Mitigata Can Help
Being the heart of the digital age, we at Mitigata understand why businesses face their unique challenges. Our cyber insurance solutions are designed to prevent business losses but arm businesses with a chance to recover even more quickly after an attack.
With expert guidance, comprehensive risk assessment tools, and tailored policies, companies of any size can confidently navigate an increasingly complicated world of cybersecurity. Mitigate your exposure today with our industry-standard cyber insurance solutions.
Quick Read: Importance of Cyber Insurance in Data Breach Prevention.
