The Indian economy is now going through a phase of transforming into a digital economy in a few years. However, this growth in the digital space has also increased the risk of Indian companies towards cyber risks. Indian Cyber Emergency Response Team, or CERT-In, notes that in 2023, cyber-attacks in India increased by over 50% compared to the previous year. The effects of these developments have been evaluating the cost of cyber insurance due to increased premiums as companies seek to alleviate risks associated with their assets against damages.
The Evolution of Cyber Insurance in India
Early Adoption and Growth
During its formative years, cyber insurance in India remained a largely untapped professional line of business and was primarily purchased by large enterprises with a significant digital footprint. However, as the rates and scale of cyber-attacks have increased, more businesses, including optimal business entities and SMEs, are starting to appreciate the essence of such insurance. The cyber insurance market in India stood at around USD 50-60 million in 2023, and the market is expected to grow at a compound annual growth rate of 27-30%.
The uptake of cyber insurance in its early stages was mainly due to moving factors of the IT, finance, and healthcare industries, which were some of the earliest sectors to understand the scope of digital risks. These sectors have always been at the core of driving the growth of the cyber insurance market in India.
The Role of Regulatory Changes
This year we marked the turning point for the future of Cyber Insurance in India, as the Digital Personal Data Protection Act was enacted. This law has placed stringent requirements on data protection for companies, making insurance indispensable. Lawmakers have turned to the latest legislation, which requires enterprises to implement comprehensive protection against cybercrime within an organization. Noncompliance with this could result in heavy penalties.
This condition puts employers with cyber insurance provisions in demand, and it is especially acute for SMEs that increasingly appreciate their cybersecurity posture.
Therefore, this has triggered a spike in demand for cyber insurance and work, particularly in small and medium enterprises (SMEs). This rise in magnetization has assured an increase in prices, which assists insurance companies in covering large numbers and diverse kinds of businesses.
Key Factors Leading Towards the Rise of Cyber Insurance Premiums
1. The Problems Related to Rising Cyber Attacks
According to a factor explained for the rising cyber insurance premiums, the number of sophisticated cyberattacks has been growing. CERT-In said that it saw 18 million cyber attacks last year, 50 percent higher than the year before. The incidents cover the gamut from fairly basic phishing attacks to highly accomplished ransomware campaigns aimed squarely at financial institutions and critical infrastructure.
Ransomware attacks have become more frequent and devastating. In 2023, the average amount paid for ransom increased by 20%. Prime across the globe, with many Indian corporations paying ransom amounts running to crores. People have lost money because of these attacks, which has prepared insurance companies for the worst by increasing the premiums due to future claims.
Another disturbing trend is that cybercriminals use advanced technologies such as AI and data analytic tools to execute attacks. These technologies help establish the methodologies of penetrative attacks, which discourages businesses from practicing preventive measures. To respond to this increased risk, premiums are increased, and the underwriting processes are altered.
2. Regulatory Changes and Compliance Costs
India’s regulatory environment has seen tremendous changes in the past few months, as the country introduced the Digital Personal Data Protection Act of 2023. The act also demands that businesses spend money purchasing protective measures to keep customer information from leaking, follow up in the event of a leak, download the penetrable data, and report to the authorities.
The regulatory environment in India has evolved noticeably over the past few years, especially after the introduction of the Digital Personal Data Protection Act of 2023. The law requires companies to invest in protective measures to secure their clients’ information from being leaked and, in cases of leaks, download sensitive data and promptly report to the authorities.
Compliance with such costly and complex regulations is another headache, especially for SMEs (small and medium-sized enterprises) that likely need help purchasing cutting-edge security technologies. This has driven many organizations towards cyber insurance, as they aim to offset the financial risks of noncompliance. The rise in coverage demand has resulted in higher rates, especially for firms operating in more fraught locales like finance and health care.
3. Industry-Specific Risks
No two industry types are as susceptible to cyber threats, and the cost of cyber insurance premiums will be based on fulfillment rates. For example, finance and healthcare have boatloads of personal data (which, when stolen, is particularly damaging) and are, therefore, juicy targets for genies that can lead to malicious landmines.
According to the Verizon Data Breach Investigations Report, India witnessed similar patterns. The finance sector alone suffered more than 1,800 cyber incidents worldwide in 2023.
Financial institutions in India pay some of the highest premiums because they handle so much personal data. The healthcare segment has seen similarly stiff increases in premiums, mainly due to the surge in ransomware attacks targeting hospitals and other medical providers.
4. Increased Payouts by Insurers
Insurers are also experiencing increases in their pay due to cyber claims. As cyberattacks become increasingly large and costly, insurance companies are starting to pay out more claims. The most alarming is the incidence of ransomware attacks, in which companies have had to pay a ransom to regain access to their systems. They also open their wallets to pay for business interruption losses, data recovery costs, and legal fees. This has left insurers out of pocket on premiums, which they are raising against the contingency that, based on experience, future claims will be a loss-making enterprise.
5. Evolving Threat Landscape
The cyber threat landscape is changing constantly, and new types of attacks have already emerged. More recently, new types of risk have appeared in businesses, including cyber-attacks driven by artificial intelligence (AI). They’re more complex and more sophisticated to detect, but they are very dangerous.
In general, it’s enough work just attacking with new threats, but the rise of the Internet of Things has led to many more possible weak points on networks, and more such points mean more potential for exploitation. Insurers know it is time to update the policy language and premium to reflect current changes in the threat landscape. Oversight may be getting stricter as insurers who fail to build a robust cybersecurity program risk having their premiums rise so they can protect their bottom lines.
Quick read: The Economics of Cyber Insurance: Balancing Premiums, Payouts, and Profitability
The Impact on Indian Businesses
Notably, the increasing price trend applicable to cyber insurance has a proportionally more significant knock-on effect on Indian businesses, especially SMEs. With premiums on the rise, administration is increasingly becoming a headache that cuts into their already small budgets, and it’s no wonder many are looking for solutions that could ease managing these spiraling costs. As a result, businesses are eliminating their cover, giving it, and doing it with costs if they’re hit with a cyberattack.
Larger organizations view the rising cost of cyber insurance as a necessary expense. Additionally, they understand the difficulties of damage control and mitigate the financial impact of cyber attacks. They are willing to cough up more to be assured of complete protection from insurance.
Strategies for Managing Cyber Insurance Costs
1. Implementing Strong Cybersecurity Measures
Introducing robust cybersecurity measures can be one of the most effective ways for businesses to mitigate cyber-insurance costs. Organizations that implement suitable security protocols are generally less risky and, hence, have lower insurance premiums from insurers.
Measures Businesses Can Adopt To Reduce Their Cyber Risk
- Regular Security Assessments: Regular security assessments help businesses discover and fix any vulnerabilities that would be otherwise exploited by people trying to gain unauthorized access to the system.
- Employee Training: Cybersecurity training can dramatically diminish human error, one of the primary causal agents of data breaches.
- Advanced Security Technologies: You can equip your business with advanced security technologies, such as firewalls, encryption, and multi-factor authentication, to protect its systems and data.
2. Selecting the Right Insurance Policy
Lastly, choosing the insurance policy best suited to your needs is another vital tactic to keep cyber insurance costs down. Working hand in hand with the insurance provider is necessary for the backer to be sure he or she will get the correct protection that he or she can afford. It could mean changing the policy to include all of the insurance necessary for the business to operate.
3. Collaborating with a Cybersecurity Consultant
Partnering with a cybersecurity consultant is a possible way for businesses that do not have the requisite in-house expertise to deal with the cybersecurity risk they are facing. Companies can lower their insurance costs, and a consultant can help them write a thorough cybersecurity plan and then implement it.
4. Government-Industry Collaboration
With cyber threats increasing and the need for cybersecurity insurance expanding, governments, sectors, and insurers all have a role in constructing robust cybersecurity standards and practices among businesses to curb risks. They also consider tax incentives or grants to entities that invest in cybersecurity infrastructure. This would help shift the cost of implementing good security, making it easier for the firm to protect against cyber risks of many different kinds.
What’s Next In Cyber Insurance in India?
The increasing change in the digital realm could very well raise the uptake of cyber insurance in India. However, the premium hikes are likely to pose a threat to companies, particularly SMEs. Insurers may, therefore, have to develop new, cheaper, more tailored policies that meet the specific requirements of a typical small business.
Similarly, organizations will spend on comprehensive cybersecurity protections to reduce their vulnerabilities and insurance costs. They must start investing in more advanced security technologies and conduct regular security assessments and cybersecurity training with their employees.
Conclusion: Handling the Complicated Parts of Cyber Insurance
The price of cyber insurance has escalated in India, a testimony to businesses’ increasing consciousness of the risks that arise from cyberspace. Cyber insurance (buying a new kind of insurance product to protect companies from financial losses when they’re hit with more frequent and sophisticated cyber attacks) has become something of a necessity over the past decade or so.
The escalation in the price of cyber insurance in India is a testimony to the increasing security consciousness in businesses about the possibilities of cyber risks.
More frequent and sophisticated cyberattacks led companies to buy a new kind of insurance product, cyber insurance, to protect themselves from financial losses.
Actual and Strategic Cost Understanding
Cyber insurance is more than just a cost; it’s an investment in long-term business and survival. According to The Data Security Council of India (DSCI), in 2023, the average cost of a data breach in India hit ₹14 crore, which proves that we need stronger insurance coverage.
Wrapping-up: Getting through the Complicated World of Cyber Insurance
The rising cyber insurance costs in India reflect Cyber risk awareness among companies. As the attacks became more frequent and credible, businesses started seeking cyber insurance to cover the loss of financial ruin.
However, only those are the start of the icing on the financial cake — lost revenue, legal costs, and regulatory fines.
You can profit from our real-world experience in these case studies: Cyber Insurance Case Studies
The Role of Advanced Technologies in Cyber Insurance
AI and Machine Learning: A Double-Edged Sword
The threats we face in the cyberspace arena are not getting any easier, and they have not gone away. However, they can be eliminated if we get a little creative with the technology we use to fight them. Artificial Intelligence (AI) and Machine Learning are becoming a more important role in information security and cyber insurance.
First, these technologies are assaying risk more acutely and tailoring policies accordingly. On the other hand, cybercriminals are using them to penetrate and attack even more. For instance, said attacks can work with AI and bypass traditional security models, which makes it harder for businesses to protect themselves.
This has forced insurers to update their policies and premiums to cover these new risks. These technological advances will make it tricky for companies to maintain themselves if they are not on the cutting edge of their technologies and using the best techniques to protect themselves, they may have to deal with higher premiums and less coverage.
The Internet of Things (IoT): New Risks, New Solutions
As the use of IoT devices rises, new vulnerabilities for cybercriminals to exploit are being discovered. These devices, which make for easy entry into cyberattacks, are often less secure than traditional IT infrastructure. In turn, businesses that use many IoT devices are riskier and may pay a higher premium for cyber insurance.
Insurers are devising increasingly novel ways to respond to these risks. For instance, a few insurers are insuring against risks with specialized policies, and some are evaluating IOTrisks’ security during the underwriting process. Being proactive about securing their Internet of Things devices can reduce risk and lower insurance premiums for businesses.
Mitigating Cyber Insurance Costs: Best Practices for Indian Businesses
1. Invest in Cybersecurity Awareness and Training
One of the most effective ways to reduce cyber insurance premiums is to invest in cybersecurity awareness and employee training.
Human error is a leading cause of data breaches, and insurers recognize that businesses with well-trained employees are at a lower risk of cyberattacks. Companies can reduce their risk and lower their insurance premiums by providing regular training on topics such as phishing, password management, and data protection.
2. Implement Comprehensive Security Measures
In addition to employee training, businesses should invest in comprehensive security measures, such as firewalls, encryption, and multi-factor authentication. These measures protect against cyber threats and demonstrate to insurers that the business is taking its cybersecurity responsibilities seriously. This can lead to lower premiums and better coverage.
3. Conduct Regular Risk Assessments
Regular risk assessments are essential for identifying and addressing vulnerabilities before cybercriminals exploit them. Insurers often offer lower premiums to businesses that conduct regular risk assessments and take steps to mitigate identified risks. Companies can develop a comprehensive risk management strategy that reduces their exposure to cyber threats by working with a cybersecurity consultant.
The Role of Government Regulation
With cyber threats changing with time, government regulation is expected to become important in formulating the cyber insurance market in India. This is just the beginning of the Digital Personal Data Protection Act of 2023. Regulations can go beyond requiring some industries to buy cyber insurance; they could be formalized by setting up a central cyber risk management agency that determines minimum standards for cybersecurity and insurance coverage.
The regulations to come will likely spur the further growth of the cyber insurance market, but they will also place a greater burden on businesses to conform to new standards. If businesses do not meet these standards, they will likely face higher premiums or be denied coverage.
The Growing Importance of Cyber Resilience
In our increasingly sophisticated cyber world, businesses will have to not only prevent but also prepare. This means developing the capability to quickly recover from a cyber attack and minimize its impact on operations. Insurers are becoming increasingly inclined to support this critical part of the cyber ecosystem by offering cyber resilience coverage, ranging from business interruption coverage to access to cybersecurity experts in incident response.
Mitigata’s Role in Navigating the Cyber Insurance Landscape
Handling the intricacies of cyber insurance is tricky, but it doesn’t have to be done alone. Mitigata is committed to quality insurance solutions, helping protect Indian businesses against cyber threats. Mitigata focuses on customer service and expert support to help businesses mitigate their cyber risks and get the coverage they require for their industry at a price they can afford.
Mitigata will interact, give advice, and find solutions for businesses to aid them in forging ahead of the curve as the cyber insurance landscape evolves. With the expertise and resources at our disposal, Mitigata is here to help you whether you’re looking to secure your first cyber insurance policy or renew your existing one.
