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Business News/ Insurance / News/  Cyber insurance on rise as attacks surge

Cyber insurance on rise as attacks surge

Premiums growing at 35% CAGR led by banks, IT, manufacturing firms

Cyber criminals usually force company managements to halt manufacturing and payments through malware attacks, and the whole business comes to a standstill. istockPremium
Cyber criminals usually force company managements to halt manufacturing and payments through malware attacks, and the whole business comes to a standstill. istock

MUMBAI:India Inc. is increasingly looking at dedicated cyber security insurance covers to address pervasive cyber threats including malware attacks, compromised emails, cryptojacking, or instances of disgruntled employees or adversaries attacking software systems and machinery.

India Inc.’s cyber insurance cover ranges $1-100 million a year, and is growing at 35% annually. In fact, experts said cyber insurance is the fastest-growing insurance segment in India.

While banks, non-banks and information technology services companies were the first to buy cyber insurance covers due to higher exposure to digitally-connected systems and to protect financial transactions, startups and manufacturing firms are now waking up to the importance of such policies, especially post-pandemic, as they digitize their entire production and billing processes. “Cyber insurance business is growing at a CAGR (compound annual growth rate) of 30-35% over the past two years. Around 300-400 crore comes from cyber policies alone for insurers now. At least 2-5% of the overall new premium collection is generated from sales of cyber insurance," T.A. Ramalingam, chief technical officer, Bajaj Allianz General Insurance, said.

According to Sanjay Datta, chief of underwriting, reinsurance and claims, ICICI Lombard General Insurance Co. Ltd, the cyber insurance market is growing at over 50%. The high growth rate is primarily due to a low base, since the insurance coverage of a company’s digital assets three years ago was low due to a lack of awareness. Assets are typically 50-100 times the annual premium paid for cyber insurance.

The premium for insurance depends on the size of the company, and consulting firm Aon pegs it at $1 million-100 million for India. Ramalingam said the premium amount depends on a company’s turnover, probability of losses, and the availability of adequate IT backup systems. “The premium for global companies is higher than domestic firms," he added.

Industry watchers said that after two years of the pandemic, the manufacturing sector which was forced to digitize processes, from billing to procurement, is one of the key segments to buy cyber insurance.

But due to frequent cyber attacks, and the severity of loss ratio over the last three years, cyber insurance premium cost has increased by over 50% over the past year, said Datta.

Cyber criminals usually force company managements to halt manufacturing and payments through malware attacks, and the whole business comes to a standstill, causing significant revenue losses, said Bajaj Allianz.

Recently, a manufacturing major, which bought a cyber liability insurance cover from ICICI Lombard, had to suspend operations following a ransomware cyber-attack. “It had cover for business interruption losses, forensics expenses, etc. Our cyber claims experts engaged with it within the ‘Golden Hour’ and mitigated the damage to systems, and limited business interruption losses. Simultaneously, we engaged forensic experts to find out the extent of ransomware penetration in the system and helped the company to restart operations. The policy covered losses arising out of business interruption, forensic experts fees and related expenses to the ransomware attack," said Datta of ICICI Lombard.

A senior advisor on cyber insurance said that on 31 December, 2021, employees of a manufacturing firm received an email from the HR department that the company was offering them gift vouchers. Most employees, including the chief executive, clicked on the link and it turned out to be malware that brought down the company’s systems. “There is significant rise in demand for cyber insurance in India with a potential CAGR in excess of 40% in the next three years," said Prasanna Kumar, executive vice president and head, financial services, and professional group, Aon.

Kumar told Mint that there is demand for cyber specialists who can advise clients on addressing their needs. “The critical part is demand for forensic consultants, legal counsels, incidence response consultants."

According to Deloitte, cyber insurance as a skill set is rare and “complicated". “ Unlike regular insurance covers, there is no historical data for cyber insurance and every other day a new threat emerges," said Anand Venkataraman, partner, Risk Advisory, Deloitte India.

A cyber insurance underwriter will need to know about the insurance sector and cyber attacks, which is a very new area.

While ransomware remains the top form of threat, email exposures by disgruntled employees and cryprojacking -where the attacker takes away access to terminals and illicitly mines cryptocurrencies- are gaining notoriety.

“As of now there are two types of products - ‘Corporate Cyber Liability policies’ for corporates, and retail cyber liability policies for individual buyer. In addition, there is a growing segment of B2B2C where a corporate buy a policy for its customers or offer them to buy it on their own platform or application," Datta of ICICI Lombard General Insurance told Mint.

According to Datta, more than 3,000 corporates buy cyber insurance policies while 20,000 plus policies are held by individuals. The uptick in digital payments has raised the need for more insurance against cyber attacks.

“The business prospects and demand of cyber insurance will be very high due to every day increased adoption of technology , ever changing and dynamic nature of the risks which it represents. We foresee even the best of the cyber secure firms opting for cyber insurance as a residual risk transfer mechanism," added Datta.

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Devina Sengupta
Devina tracks and writes on workplaces, human resources and education for Mint. She also occaisionally writes an opinion column. She hosts a podcast on interesting HR trends in corporate India called The Working Life.
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Published: 29 Aug 2022, 12:29 AM IST
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