The increased dependence on technology for executing business processes, engaging customers, and guarding data has become a significant cause of cyber risk and unpredictable disturbances. It gives rise to two critical tools: cyber insurance and disaster recovery. It is a choice between the two in many ways, though some business leaders would look at it that way. The latter protects against disaster recoveries, ensuring businesses stay online after any disruption, whether through cyber-attacks or a hurricane destroying their business.
Incident: Ransomware Attacks on Indian Companies
The most notable incident, probably recently, was the ransomware attacks on Oil India Limited in 2022. During the attack, the company lost some access to its critical systems and data, which primarily affected the operations involved.
OIL was compelled to report the breach to the authorities and customers, and the dollar cost started shooting up quickly. Oil India had excellent cyber insurance covering most of the legal and recovery costs.
Without proper disaster recovery planning, their downtime has been stretched far beyond the expected time, thus implying a need to balance both.
Quick Read: Cyber Insurance Premiums in 2024
Definition of Cyber Insurance and Disaster Recovery
What Is Cyber Insurance?
The motive of cyber insurance is the financial protection of businesses from the after-effects of a cyber incident. These can be a data breach, ransomware attack, phishing scam, or cybercrime. Lately, rates of adoption of cyber insurance in India have gone at quite a pace because people realize the importance of acquiring protection for one’s digital assets.
Early adopters who opt for cyber insurance include the IT sector, pharma, finance, and manufacturing.
Cyber insurance policies commonly cover the following:
- Data breach: Comprises the costs of notification, investigation, and remediation.
- Business Disruption: Financial compensation for lost income resulting from a system shutdown following an attack.
- Legal liabilities include fines, penalties, and third-party claims.
- Ransomware payments: While some policies still pay for ransom payments, insurers are getting stricter about this
What Is Disaster Recovery?
Disaster recovery (DR) focuses on restoring the IT system and data quickly following any event that may cause disturbances. A disaster could be an act of nature, such as a flood, earthquake, hardware failure, or even a cyberattack, such as ransomware.
DR becomes part of a broader business continuity strategy, mirroring the intent of effect minimization, and it equips firms with the resources to quickly return to normalcy.
Disaster recovery has several vital elements:
- Data backup: Keeping regular backups of vital data so that critical data can be recovered if lost or corrupted.
- Recovery Time Objectives: The time for restoration to normalcy after the disaster.
- Recovery point objectives (RPO): The number of accepted data losses in time, such as how much data can be lost between backups.
- Cloud-based recovery: Using cloud services to back up data in multiple geo-locations, thus providing redundancy and resiliency.
The Indian Cyber Threat Landscape
This has exposed businesses to critical cyber threats because of India’s rapid digitalization. In 2023, India ranked third worldwide in ransomware attacks, with three out of four organizations experiencing at least one ransomware incident.
Financially, these attacks have caused havoc, especially for SMEs that cannot afford to access resources from wealthier corporations. A report by the DSCI in 2023 states that cyberattacks have increased and become more skilled and precise when targeting businesses within various sectors of the banking, healthcare, and manufacturing industries.
On the other hand, the downtime cost caused by cyberattacks in India has also increased. The latest Veeam Data Protection Report revealed that 73% of Indian organizations experienced higher insurance premiums following a ransomware attack. This is because there are extended downtimes when they need to equip themselves with the right disaster recovery mechanisms, which amplifies their financial losses.
Why Cyber Insurance Alone Is Not Enough
Even as an essential tool in managing financial fallout from a cyber incident, reliance solely on that may not be enough.
Here’s why:
Therefore, cyber insurance can only pay for part of the financial damage caused by cyber-attacks. It can pay the ransom or necessary payments for legal fees and third-party liabilities. Nonetheless, it cannot restore lost data or retool damaged systems.
Businesses can only face extended downtimes without a good disaster recovery plan, even after receiving an insurance payout.
- Higher Premiums: Due to the rising frequency of ransomware attacks, the premium rates of businesses with a weak cybersecurity disaster recovery framework are increasing. Insurance companies increasingly insist that recovery schemes are in place before coverage is provided.
- Reputation Damage: Cyber insurance will cover recoveries but cannot prevent reputational damage from extended downtime. A disaster recovery strategy ensures businesses can restore services quickly, minimize the risk of losing customers’ trust, and protect brand image. Companies can cover financial risks and probable long-term reputational damages through cyber insurance and a good disaster recovery policy.
Disaster recovery saves just a few pennies of loss.
Complete dependence on disaster recovery needs to be improved. Disaster recovery may enable the recovery of systems and minimize operations’ downtime, but it cannot account for the dollar and cent cost of exploiting a cyber attack.
Synergy of Cyber Insurance and Disaster Recovery
How do businesses leverage cyber insurance together with disaster recovery?
1. Financial Security and Rapid Recovery
Companies can successfully hedge financial loss by incorporating cyber insurance into disaster recovery.
Here is how:
- Cyber insurance protects the financial aspects such as fines, ransom payments for ransomware, and legal fees.
- Disaster recovery ensures that IT systems are restored quickly, minimizing operational disruption and preventing further financial losses.
2. Compliance and security standards
Many cyber insurance policies require enterprises to establish proper disaster recovery plans before reporting any events to activate this cover. Plans are also subject to applicable regulatory requirements enforced by the authorities in India, like IRDAI (Insurance Regulatory and Development Authority of India) and SEBI (Securities and Exchange Board of India), which have strict reporting provisions for cybersecurity incidents.
With cyber insurance now integrated with disaster recovery, avoiding hefty fines has become all the more critical for businesses in heavily regulated industries, such as banking and healthcare, to continue complying with data protection laws.
Cost-Effective Solution for SMEs
Cyber insurance and disaster recovery have been efficient solutions for SMEs in India since most typically do not have as much money as larger corporations.
Instead of building heavy infrastructure, SMEs may use cloud-based disaster recovery solutions and take out cyber insurance policies that afford greater tailored protection against growing cyber threats.
The Way Mitigata and Datamotive Work Together
Mitigata and Datamotive offer business entities an integrated service offering cyber insurance and disaster recovery. Mitigata personalized cyber insurance solutions, focusing on issues related to data breaches, ransomware, and other cybercrimes in general.
On the other hand, Datamotive is a disaster recovery and cloud migration company; this helps make companies ready to recover their systems when they are disturbed.
These two companies’ combined approach to cyber risk management helps Indian businesses feel safe and compliant while they are up and running.
Conclusion: The Best of Both Worlds
Indian businesses do not need to choose between cyber insurance and disaster recovery. Both work complementarity to protect businesses through financial loss and operational resiliency in the event of a cyber attack or any other disruption. By incorporating both into the risk management strategy, businesses are better protected against the spectrum of risks they face in today’s digital economy.
Whether it is Mitigata’s cyber insurance policies or Datamotive’s disaster recovery solutions, Indian businesses can then capture and deploy these synergies to ensure that they are well protected against the financial and operational impacts that various types of cyber incidents and disasters may inflict.
Contact Mitigata and Datamotive today to learn more about how you can protect your business through these all-in-one solutions.
