The Internet has become an integral part of our life given our increased dependence on digital platforms for everyday tasks, from banking, shopping, paying bills to even connecting with friends.
While this has made our lives easier in many ways, it has also opened the doors to cyberattacks and allied threats which has grown considerably in recent times. Incidents like data breaches or online theft are becoming more common these days. This has brought to light the urgent need for cyber insurance nowadays.
What Is Cyber Insurance?
Cyber insurance is a financial product that protects businesses and individuals from the financial consequences of cyberattacks and data breaches. It covers a variety of expenditures linked with Internet-based risks, including IT infrastructure damage, data loss, and incident management and recovery charges. This sort of insurance frequently addresses issues not normally covered by regular commercial liability plans which may exclude some cyber-related hazards.
How Does Cyber Insurance Work?
Cyber insurance works in the same way as other forms of insurance and is offered by many insurance companies. It includes both first and third-party coverage. First party coverage deals with losses sustained directly by the organisation, whereas third party coverage deals with damages caused by others as a result of the company’s cyber events.
A cyber insurance policy helps cover financial losses resulting from cyberattacks or data breaches as well as remediation expenditures, such as investigation, crisis communication, legal services, and consumer reimbursements.
Growing Importance of Cyber Insurance
Nowadays, individuals also need cyber insurance, as they are increasingly targeted by cyber threats. With personal information being widely shared online, risks of identity theft and cyber fraud have become more prevalent.
Cyber insurance for individuals provides crucial protection against financial losses from cyber incidents, similar to how businesses use it to cover risks of data breaches and cyberattacks. This coverage ensures that individuals can recover from fraud, manage legal challenges, and safeguard their personal information.
A report in the whitepaper Closing The Cyber Risk Protection Gap, published by Marsh McLennan in collaboration with Zurich Insurance Group, says: “As reliance on digital technologies grows, the global cost of cybercrime is projected to surge from $8.5 trillion in 2022 to nearly $24 trillion by 2027. Despite efforts to increase cyber resilience, businesses and individuals alike are still underinsured, leaving a significant gap between insured losses and actual economic losses from cyberattacks. This gap underscores the crucial role of cyber insurance in providing financial protection and managing risks associated with increasingly sophisticated cyber threats.”
How Cyber Insurance Can Benefit Consumer
According to experts, most individuals are not well versed with the dangers posed by cybercrime, and therefore are unaware of the benefits of cyber insurance.
Says Ritesh Thosani, senior vice-president, cyber practice leader, Marsh India: “Many individuals remain unprepared for digital threats due to a lack of understanding about cyber insurance. They often believe it’s only for businesses or misunderstand the scope of its coverage. There’s also a misconception that it’s too expensive, which deters people from seeking this essential protection.”
He added: “As cyberattacks become more frequent, it’s crucial to address these misconceptions and educate individuals on the importance and affordability of personal cyber insurance.”
Thosani said that businesses also need to carefully evaluate their cyber insurance policies to ensure comprehensive protection.
“Start by conducting a risk analysis to identify specific threats to your operations. Choose a policy that covers key risks, such as data breaches and ransomware, and check for sufficient coverage limits and relevant exclusions. Tailor the policy to suit the size of your business and industry to ensure it addresses your unique risks and potential expenses, including legal costs and business interruption.”
