Comments
Businesses steadily rely on digital technology to operate, store data, and communicate with a more extensive customer base, propelling their growth.
Although this convergence of offline and online worlds is a boon, it also raises cyberattack risks, particularly for small and medium-sized businesses, micro, small, and medium enterprises and start-ups.
These businesses are more vulnerable as they are still in the process of establishing robust cybersecurity means and expertise to combat cyber risks.
Thus, with the current interconnectivity, it has become crucial for small businesses to financially safeguard themselves from cyberattacks by taking cyber insurance.
If your business experiences a data breach, resulting in the theft or loss of sensitive data, cyber insurance can cover the loss.
Here are some situations where such insurance may provide cover:
Cover lost income
When a cyberattack causes a business to shut down or experience a disruption, cyber insurance can provide coverage for lost income and expenses.
If it results in damages to third parties, such as customers or partners, the insurance can cover legal defence costs and damages awarded.
So, what is cyber insurance?
Having a digital presence can sometimes be a catch-22 situation for small businesses. While it makes way for better efficiency, it also exposes companies to Internet-based perils.
These include data and security breaches, cyberattacks, intellectual property losses, cyber-safety hazards, financial fraud, etc.
Therefore, to mitigate such risks, start-ups and small businesses should purchase cyber insurance policy that has become more of a necessity than a choice.
Moreover, the policy is now gaining popularity in India as it covers the expenses of investigating and repairing damages such as restoring lost data, incurring forensic costs, providing indemnification for lawsuits, compensating clients for any loss resulting from cyber incidents.
Is it essential?
MSMEs and start-ups are crucial growth drivers of the Indian economy and also contribute significantly to the country’s GDP. However, November 2022 data suggests about 43 per cent of all cyberattacks targeted small businesses and start-ups. That is why it’s all the more important for them to be equipped with cyber insurance policy.
The policy secures the company from the repercussions of being the potential victim of a cyber crisis that may cause financial and data loss and harm it’s reputation.
Kinds of coverage
- First-party cover shields the business from costs incurred when it is afflicted by fraudulent activities such as a data breach.
- Third-party cover offers protection from legal liabilities arising from any third party, including insured’s customers, suppliers, business partners, and other stakeholders in the event of they suing the organisation for data breach and mishandling their data.
What is covered?
Some common costs covered in the policy are legal and legal representation costs, cyber extortion payouts, business interruption costs, administrative investigations, data recovery and reconstitution costs, forensic costs, etc.
- Also read: Four steps to building board cyber security
Estimation of premium
To acquire cyber insurance, businesses follow a standard procedure. Insurers comprehensively evaluate the risk and offer coverage options.
Accordingly, the firms must share documents outlining the specifics of the security procedures and protocols. The insurer then follows statutory norms to determine the applicant’s eligibility and the premium required. But, there is no fixed premium, as it varies based on the sector and the quality of risk.
What is not covered?
Cyber insurance broadly protects the insured against various risks; however, it comes with some exclusions such as violation of contracts, breach of trade secrets and trademarks, and disputes over registered patents or intellectual property.
In addition, deceitful or deliberate behaviour or any fraudulent act infringing the rule or regulation is not covered.
Property damage, harm, or injuries caused due to negligence, lack of precaution to safeguard confidential banking information, etc., are also not covered. Ongoing and uninsurable legal cases and physical injury, death, or damage to any tangible object remain uninsured.
To recapitulate, cyber insurance is crucial for enterprises of all sizes, as companies conduct substantial business online.
But before buying, evaluate the features, and check the coverage limits, inclusions, and exclusions that correspond to your needs. Also, be cognisant and read the terms and conditions before purchasing the policy.
(The writer is Head-Corporate & SME Insurance, Policybazaar.com)
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.