Manage Cyber Risk by opting Comprehensive Insurance Plan
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Cyber risk insurance is a relatively new insurance product; therefore people are not fully aware about the reach of the coverage and the kind of security it offers. In today’s technology and data driven business ecosystem, cyber risk can incur unprecedented damage or loss to a company. Sectors like banking, finance, IT service, e-commerce etc. carry high volumes of highly sensitive data that can create havoc if it falls in wrong hands. In order to evade such an event, several big and small companies spend lakhs of rupees each year to secure the frontiers of their cyber wall.
Identifying the potential risks is the first step towards cyber security. Typically most companies are faced with three kinds of risks- unauthorized access to company data by a third party, unintended errors and omission by a company’s employee, contractor or vendor and finally improper implementation of system( software bug), integration flaws, etc. However, despite best measures, a breach is always possible, which is why cyber risk insurance is relevant extending a much needed safety net against potential damage and litigation.
But what exactly a cyber risk insurance policy entails? Generally speaking, the terms and conditions of an insurance policy related to cyber risk vastly vary. The policy may extend cover to cases related to loss of data, e-theft (money), loss of reputation, cyber exhortation etc. Unlike some of the standard insurance policies that have a set number of features, cyber risk insurance is a highly flexible insurance product that can be created depending upon the individual need of an enterprise. However, the extent of the cover can be broadly classified into:
First -party insurance (enterprise), that provides cover for the following scenarios
- Damage of digital possessions like expensive software’s, data etc.
- Loss of business caused due to interruption of network
- Cover against cyber exhortation and cyber espionage
- Cover for theft of money, digital access or any kind of financial loss
And then there is, third-party (customers) that provides relief to the enterprise if faced with the following situations-
- Loss of customer information
- Payment of compensation to customers for non-availability of service
- Covers cost of legal liability and payment of compensation to customers in case of defamation, loss of personal details etc.
Cyber accountability is not an imagined scenario or situation. As per a KPMG report, 72 % of Indian companies faced cyber-attack in 2015. The report further revealed that most common form of cyber-crime was related to financial motives. India is now only second to China in terms of the number of devices connected to the World Wide Web. And with so many industries transgressing their business to online portals and cloud terminals, the risks and vulnerabilities are quite high.
A single episode of cyber-attack can cause immense business loss. And if you thought that only the banking and IT sector are vulnerable to such attacks, you must think again. Even hospitals, hotels, entertainment companies and automobile companies are on the radar of hackers and cyber delinquents. The servers spread across all over the world, carries sensitive information like financial details, medical condition of a patient and guests at a hospital or hotel respectively. This information’s are required to be protected as nobody can really anticipate the motive of the cyber attacker and the extent of the consequence. The release of pertinent information on the public domain can not only cause embarrassment to the concerned third-party, it may also lead to expensive lawsuit.
Therefore, irrespective of the size of the enterprise, cyber risk insurance scheme should be an integral component of the cyber security strategy. The legal aspect of cyber security breach can be quite complicating, and many companies are not exactly equipped to handle this and require legal representation. When it comes to legal representation and cyber espionage, the cost for both is quite high. And compared to that, the cost of procuring a cyber risk insurance policy is affordable.
Several industry experts feel that the regulatory mechanism of the Government in India with respect to cyber-risk insurance is not satisfactory. Therefore, companies are turning to private insurance companies for cyber protection. Accountability in cyber-crimes is a very serious matter. Even, if you are not directly responsible for the breach, you will be held responsible for the aftermath. Indian companies have to now move away from general policies as a mean to protect their business assets, and take up a more comprehensive insurance policy that is tailor-made for business processes of the 21st century.
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