Cyber Security Insurance: Coverage, Claim & Exclusions

Updated: 27-06-2022 16:31:43 PM

Cyber security insurance safeguards online users from damage and loss which might arise due to unauthorized disclosure of personal and financial data. Apart from financial cover, it will also give you the umbrella to keep away from psychological stress which might arise otherwise due to hacking of sensitive date.

What is Cyber Security Insurance?

Cyber security insurance is the new age policy which tries to safeguard online users from online criminal acts. Net banking, social networking and online shopping are some of the daily activities performed by Indian users over the internet.

The increasing use of the internet is also increasing the users’ risk to become a victim of thefts, hacking, cyber stalking and digital fraud. Keeping all this scenario in mind, today the demand for cyber security insurance is going up.

Read More: What is Commercial Insurance – Coverage, Claim & Exclusions

Types of Cyber Security Insurance

This insurance can be classified under two headings:

Individual Cyber Security Insurance: It is meant for the daily online users. The policy covers risks associated with fraudulent activities like identity theft, malware attacks, cyber stalking, IT theft loss and social media liabilities.

Cyber Liability Insurance: It covers cyber risks associated with IT firms. It is an IT firm’s liability when it stores customers’ personal and financial data on the servers.

What all Cyber Security Insurance Covers?

Cyber security insurance coverage can be classified under the following heads:

Identity Theft: Use, deletion or alteration of personal data stored on the computer:

• It covers prosecution costs which arise when a case is filed against a third party.
• Cost of transportation to the court and photocopying of documents.

Social Media Liability: Identify theft occurring on social media account.

• It covers prosecution costs which arise while filing a legal case against a third party.
• Costs of transportation to the court and photocopying of documents.

Cyber Stalking: Using digital media to harass or frighten an online user.

• Costs which arise when a legal case is raised against a third party.

Malware Attacks: This is a computer program which is received through texts, file transfer, downloaded programs or malicious activities on digital devices.

• It covers restoration cost of damage to the digital device caused by malware.
• Costs of transportation to the court and photocopying of documents.

IT Theft Loss: Cyber intrusion in the computer which led to unauthorised payment to third parties.

• Financial loss due to IT theft.
• Legal expenses which arise from a claim lodged by a third party.
• Prosecution cost against a third party for causing IT theft.

Phishing: Unauthorised access to usernames, passwords and credit card details.

• Financial loss due to loss of sensitive information.
• Prosecution costs which arise against a third party for phishing attack.

Email Spoofing: Forgery or manipulation of email headers so that the recipients understand that the email is from the actual source.

• Financial expenses arising out of email spoofing.
• Prosecution costs which are against a third party.

Media Liability Claims: Unintended publication or broadcast of any digital content as a result of cyber-attack.

• Prosecution costs to claim compensation from a third party.
• Costs of transportation to court and photocopying of documents.

Cyber Extortion: Threat to cause privacy breach, cyber attack or data breach.

• Loss caused by such threats.
• Prosecution costs which arise when claiming compensation costs from a third party.

Privacy & Data Breach by third party: Unauthorised disclosure of personal data.

• Legal expenses insured to claim compensation from a third party when any of the above mentioned breaches arises.

How does Cyber Security Insurance Functions?

Applying for cyber security and getting the coverage is an easy process. Let us understand how it works:

• Submit an application for the insurance
• Inform the nature of risk to be covered
• After analysing the risks, the insurance company discusses the coverage, terms and conditions with the insurers
• After these are settled, the insurer asks for a proposal from the policy seeker
• The proposal along with the required documents are submitted to the insurance company
• The policy is structured and handed over to the policy holder
• In case of any eventuality, the insured informs the insurance company about the same
• Documents and evidence are submitted to the insurer
• An investigator validates the claim and sends the report to the insurer
• If the claim is as per the policy, the compensation is provided to the claimant
• Else, the claim is rejected and the same is informed to the claimant
• If the claimant is not satisfied with the resolution, arbitration can be arranged

Eligibility Criteria 

Anyone above the age of 18 years can buy the cyber security insurance policy.

Cyber Security Insurance Claim Process

Cyber security insurance has a quick and easy claim settlement process. Let us look at the steps to make claims:

• Claim needs to be submitted within 90 days
• Claim must be submitted in written format
• Required evidence of loss must be submitted to the company
• An investigator from the insurance company verifies the claim
• If the claim is according to the policy, the compensation is paid to the beneficiary account
• If the claim is rejected, the same is informed to the claimant
• The claimant may ask for arbitration, if the resolution is not satisfactory

Documents Required for Claim Process

• Forensic reports
• Duly filled in claim form
• Screenshots of findings
• Details and evidence of loss like dates, acts or circumstances, people involved and mitigating practices

How Long Does it Take to Pay Out a Claim?

After filing the claim for cyber security insurance, the insurance company usually takes approximately 30 days to make the payment under the claim.

Cases Where You Can’t Claim Cyber Security Insurance (Exclusions)

Cyber security insurance safeguards online users from risks arising out of multiple unpleasant circumstances. However, in certain cases, you cannot claim the insurance. Some of the exclusions under the policy are:

• Dishonest or improper conduct of the insured which led to the claim
• Physical injury caused due to cyber attack
• Property damage caused by cyber attack
• Unsolicited communications by the policy holder
• Mechanical failure, standard depreciation, electrical disturbance and media failure or malfunction

Companies offering Cyber Security Insurance in India

Many insurance companies in India offer cyber security insurance at a reasonable premium. The sum insured can range from Rs 1 lakh to Rs 1 crore. Some of the companies in India offering this insurance are:

• HDFC Ergo
• Bajaj Allianz
• SBI General

Important Aspects

Before purchasing a cyber security insurance, it makes sense to understand certain points that will help in gaining the maximum out of the insurance.

• If a claim falls under multiple insurance clauses, compensation can be claimed only for one
• Cyber security insurance can be extended to cover risks occurring at any location across the world
• If the company does not delete the access to sensitive data for employees no longer a part of the organisation, the insurance company might not approve the claim in case of cyber crime
• To get a cyber security insurance, the company must have a written data protection/information security policy
• The antivirus, anti-spyware and anti-malware software should be updated regularly

Advantages of Buying Cyber Security Insurance

Increasing cases of cyber threat is now forcing organisations to take steps to protect themselves. One such step is to purchase a cyber security insurance. Looking at the benefits, many Indian firms are now opting for cyber security insurance. Some of the advantages of purchasing cyber security insurance are:

• First party and third party liability coverage
• Covers Cyber hacking and cyber attack incidents
• Helps firms cover cost of legal proceedings

FAQs

Q1. What is cyber attack?
Cyber attack refers to illegitimate transmission of data available on a digital medium.

Q2. Is there any nodal agency for cyber security?
Yes, National Security Council Secretariat is the nodal agency.

Q3. What is the policy period of cyber security insurance?
This policy is valid for a fixed period of 1 year.

Q4. What is business income loss as per cyber security insurance?
It means net loss incurred due to cyber attacks.

Q5. Can the insured extend the reporting period?
Yes, some insurance companies provide an extension period to even 90 days.

Q6. Does the previous claim influence the present claim?
Yes, the indemnity limit, excess of the insurance, name of the previous insurer and the period of previous insurance are considered during the pay  out of the present claim.