Cyber Insurance Coverage: Know How to Secure Your Financial Future

In the present age of digitalisation, the majority of businesses are adopting digital methods. The COVID-19 pandemic accelerated this transformation, which brought about a global shift towards online platforms. Various aspects of our lives, such as financial transactions, data exchange, and virtual learning, have become dependent on the internet. Consequently, the risk of cyber attacks and fraudulent activities has significantly increased. In recent years, there has been a significant increase in the number of cybercrime events, with India being particularly hard hit. This is why the importance of cyber insurance cannot be overlooked. This article explains all you need to know about cyber insurance coverage for financial security.

What Is Cyber Insurance?

Cyber Insurance offers protection against losses resulting from cyber incidents and the unauthorised access or theft of valuable data. Traditional cyber insurance primarily focuses on providing coverage to businesses and key individuals within corporations, safeguarding them from risks associated with their information technology infrastructure, data privacy, and liability related to information governance. In simpler terms, it serves as a financial safety net for businesses, compensating for losses caused by data destruction, theft, hacking, extortion, and similar cyber-related events.

What Is Covered under Cyber Insurance?

While the specifics of cyber insurance policies may vary in India, they generally offer coverage for the following types of losses:

• Loss of Income: In the event of a cyber attack leading to a business losing revenue, cyber insurance in India can provide financial coverage for that loss. This aspect holds particular significance for small businesses, as a loss of income can have severe consequences, potentially leading to business closure.

• Business Interruption: If a cyber attack necessitates a temporary shutdown of a business, cyber insurance in India can assist in covering the associated costs. This can include expenses related to restoring operations and compensating for lost business during the interruption.

• Data Recovery: Should a cyber attack result in the loss of crucial data, cyber insurance in India can help bear the costs of data recovery. This encompasses expenses associated with hiring professionals for data retrieval, as well as any necessary hardware or software required for the process.

• Legal Fees: If a business faces legal action due to a cyber attack, cyber insurance in India can provide coverage for legal defence expenses. This includes costs incurred from engaging a lawyer and any settlements or judgments involved.

• Credit Monitoring: In the event of a cyber attack compromising sensitive information, cyber insurance in India can assist in covering the costs of credit monitoring services for affected individuals. This encompasses expenses related to credit monitoring services and any costs associated with identity theft protection.

What Are the Types of Frauds That Are Covered under Cyber Insurance?

The coverage provided under cyber insurance for individuals may vary depending on the insurer, but it generally includes the following:

• Identity Theft: Coverage for theft of personal or financial information to fraudulently use someone's identity.

• Social Media Crimes: Protection against theft, manipulation, harassment, ransom demands, or unauthorised access to social media accounts.

• Cyber Stalking: Coverage for repeated electronic harassment or intimidation through channels like emails, social media, or messaging apps.

• Phishing: Protection against deceptive attempts to obtain sensitive information like credit card details or passwords by impersonating reputable organisations.

• Cyber Extortion: Coverage for situations where cybercriminals demand ransom to stop a cyber attack or regain access to personal systems or data.

• Email Spoofing: Coverage against cyber attacks that involve forging the sender's address to deceive recipients.

• IT Theft Loss: Protection against theft of financial information and sensitive data, such as credit card details or internet banking passwords, for fraudulent purposes.

• Malware Attack: Coverage for damage caused by malicious software installed on a victim's device, including data theft, file deletion, or device destruction.

• Media Liability Claims: Coverage for acts like defamation, plagiarism, invasion of privacy, or copyright infringement in the context of media content.

• Privacy Breach: Coverage for unauthorised access to personal and financial information resulting in a breach of privacy.

It is important to note that the specific coverage and terms of cyber insurance for individuals may vary depending on the insurance provider and the policy chosen.

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What Are the Types of Cyber Insurance Based on Its Coverage?

Insurance providers offer tailored plans based on industry-specific and company-specific requirements, ensuring that the coverage aligns with the buyer's needs. The following are the main types of coverage available under cyber insurance in India:

• First-party Expenses: Cyber Insurance encompasses first-party expenses, such as direct financial losses, costs associated with business interruption, mitigation expenses, recovery costs, credit monitoring, system damage, and any additional related costs.

• Regulatory Investigation Cover: This coverage includes the costs of regulatory investigations, fees for legal representation, administrative expenses, and expenses related to compliance with regulations like GDPR (General Data Protection Regulation).

• Crisis Management Expenses: These expenses cover various aspects, including the costs of forensic IT audits, expenses related to notifying stakeholders about the incident, security consultations, reputation damage coverage, coordination with service providers, credit and identity theft monitoring, protection against cyber extortion or ransomware, protection against cyber stalking, and counselling services.

• Privacy And Data Liability Claims: This coverage addresses the third-party legal liability of a company for damages arising from errors committed by the company, as well as privacy, data, or security breaches. It provides protection in cases of defamation, infringement of intellectual property rights (IPR), and potential lawsuits.

What Is Not Covered under Cyber Insurance?

There are certain exclusions and conditions that are typically not covered under cyber insurance for individuals. These include:

• Family Or Business Coverage: The insurance coverage is applicable only to the individual who has purchased the policy. Claims cannot be made on behalf of family members or a business under an individual's policy.

• Intentional Cyber attacks: If it is determined that the policyholder intentionally carried out a cyber attack, the insurance company will not be liable to cover any resulting damages.

• Pre-existing Cyber attacks: Claims will not be settled if the cyber attack occurred before purchasing the insurance policy. The coverage typically applies to incidents that occur after the policy is in effect.

• Negligence or Lack of Precautions: If it is found that the policyholder was negligent or did not take proper precautions to protect their digital assets, the insurance company may reject the claim. It is important to follow the guidelines provided by the insurance company to ensure digital protection and minimise the risk of claim denial.

By understanding these exclusions and adhering to the terms and guidelines of the insurance policy, individuals can ensure they meet the requirements for coverage and maximise the benefits of their cyber insurance policy.

What Are the RBI Guidelines for Consumer Liability?

The Reserve Bank of India (RBI) has issued guidelines to determine customers' liability in cybercrime cases. The guidelines outline two main categories of liability:

Zero Liability:

Customers have no liability in the following scenarios:

• Cases involving fraud, negligence, or deficiencies on the part of the bank, regardless of whether the transaction is reported or not.

• Third-party breaches where neither the bank nor the customer is at fault. If the customer informs the bank about an unauthorised transaction, they are not held liable.

Limited Liability:

• In cases where the customer's negligence contributes to the loss, such as sharing payment credentials, the customer bears the loss until they report the unauthorised transaction to the bank. Once the loss is reported, it becomes the bank's responsibility.

• When the liability for the loss lies with a party other than the bank or the customer, if there is a delay in notifying the bank about such a transaction, the customer's liability is limited to the transaction value.

Can Individuals Buy Cyber Insurance?

In the current era, cyber attacks are not limited to businesses alone. Numerous instances have emerged where individuals have suffered losses due to cyber fraud. With the widespread use of the internet for various activities like financial transactions, online shopping, and social media engagement, personal information has become more exposed to cyber threats. Consequently, it has become essential for individuals to consider obtaining cyber insurance coverage.

Individuals who are 18 years or older are eligible to purchase a cyber insurance policy. The coverage provided under individual cyber insurance policies includes protection against identity theft, liability arising from social media activities, malware attacks, phishing attempts, third-party data breaches, and more. Additionally, many policies offer counselling services to support victims who experience emotional distress as a result of incidents such as identity theft, data breaches, or cyberbullying.

It is crucial for individuals to recognise the risks they face in the digital realm and take proactive measures, such as acquiring cyber insurance, to safeguard themselves against potential losses and emotional consequences.

What Are the Things to Consider When Buying a Cyber Insurance Policy?

When searching for Cyber Insurance in India, it's essential to consider the following factors:

• Coverage Limits: It is important to have a clear understanding of the maximum coverage amount provided by the policy. This includes knowing the maximum coverage for each specific type of loss, as well as the overall coverage limit.

• Exclusions: Pay attention to any exclusions outlined in the policy, such as specific types of cyber attacks or data that are not covered. This could involve exclusions for certain types of data or particular cyber attack methods.

• Third-party Coverage: Understand the extent of third-party liability coverage provided by the policy. This might include protection against third-party data breaches or other forms of cyber attacks targeting external entities.

• Cybersecurity Requirements: Some insurance companies in India may have prerequisites for coverage, such as the implementation of specific cybersecurity measures. These measures could include the use of firewalls, intrusion detection systems, and other security protocols.

  By considering these factors, individuals and businesses can make informed decisions while selecting cyber insurance policies in India that align with their specific needs and offer comprehensive protection against cyber threats.

Final Thought:

While the internet is meant to enhance convenience and enjoyment in our lives, the growing prevalence of cyber attacks and crimes necessitates our increased responsibility to safeguard ourselves against identity theft and other forms of cybercrime. It is crucial to prioritise taking necessary precautions to prevent falling victim to scams and fraudulent activities.

KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

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Disclaimer: This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision.