With the Indian Government’s huge focus on digital mediums, there has been a huge surge in digital transactions. With the rise in digital transactions, the risk from cyber related incidents have also increased exponentially. This has increased the demand for cyber insurance. Rajiv Kumar, MD & CEO, Universal Sompo General Insurance shares with Express Computer, on what he believes are some of the biggest growth drivers for cyber insurance.
Some edited excerpts from an interview:
How is India as a market for cyber insurance? What are some of the key growth drivers?
At the outset, cyber insurance is the most talked about product and at the same time it is a very specialized offering. Today, cyber risk is the most discussed risk subject in company boardrooms across the globe. India with the second largest Internet user base in the world has witnessed an unprecedented surge in the number of cyber-attacks. Almost 60% of Indian companies are today taking active steps to control cyber risk losses. After the telecom revolution and Government push towards a cashless economy, cyberspace has got a big momentum. Insurance companies in India have now also started underwriting cyber insurance for past three years only.
Presently, the maximum cyber-insurance cover provided is of Rs 300 crore. Currently, the major buyers of such covers are IT companies and BPOs which handle third-party data, e-commerce firms, financial and banking institutions, small and mid-sized companies. Initiatives were taken by the Government of India, such as “Make In India” and “Start-up India” campaigns have supplemented towards the growth of the Cyber Security industry. Also, the Indian cyber-insurance providers say that the Insurance cover can be raised to Rs 600 crore based on the specific requirement of the customers. Government’s focus on digital platforms and other more digital-friendly steps in process of making “Digital India” a reality, indicates that awareness is increasing in Indian masses but still is insufficient as India is rapidly moving towards digitalization, manufacturing process which are largely automated and with Internet of things (IoT) the chances of business interruption has been maximized which opens an opportunity for cyber insurance providers in India.
How has been the adoption of cyber insurance in India? Can you give us some indicative statistics to show the growth for cyber insurance in India for your solutions?
On a regular basis, the insurance industry come across news on breach of cyber security by way of attacks such as malware, viruses, hacking, scams, fraud, and theft as a higher number of businesses transfer core data on to the cloud as well as IoT adoption is increasing. Cyber Insurance in India is evolving as fast as technology along with new regulation obligate companies to respond to information breaches prudently. Awareness about cyber risk is a major concern as large corporates are aware and are working towards cyber security, but, due to lack of awareness, the mid-size and small enterprises are highly vulnerable towards such risk.
The risk is expected to increase in the future with growth in big data and data analytics requiring even more data to be accessed. This year we saw a growth in the number of companies buying cyber insurance by 50% as compared with the last year. Majority of the clients for Cyber Insurance are financial and banking institutions, insurance companies, IT companies and BPOs which handle third-party data, e-commerce firms have bought cyber insurance cover. There has been an increase in cybersecurity incidents from 44,679 in 2014 to 50,362 in 2016, according to the information tracked by Indian Computer Emergency Response Team.
At Universal Sompo General Insurance, we have an IRDAI filed product for providing Cyber Insurance and are currently in progressive talks with few companies to bring them onboard as clients and offering our services to ensure continuity in the face of Cyber-attacks if any.
Which sectors in your view are leading in buying cyber insurance policies in India?
Risk of cyber attacks is increasing due to fast-evolving technology, which impacts the firms irrespective of industry and size. Cyber insurance in India was traditionally bought by IT firms dealing with overseas business then and now the focus has shifted to financial services and e-commerce business because of their vulnerability for cyber-attacks as they handle a large database of customers and confidential information. Now other sectors like healthcare, pharmacy companies, telecommunications firms, payment banks and wallets firms, BPOs and manufacturing companies are also ensuring to buy Cyber Insurance Policies for building a robust cybersecurity defense mechanism.
How does premium get calculated for cyber insurance? Can you help us know some of the basic parameters that your firm undertakes for deciding the premium charged?
Premium for Cyber insurance cover depends on various underwriting factors that allow an insurance company to determine the potential risk of a buyer. Underwriting factors for cyber insurance include, type of business, number of transactions done each year, what information the buyer collect, number of computers or devices, and the type of security the buyer have implemented. Major factors considered for determining the premium of cyber insurance will depend primarily on the type of business, annual revenue, and the limit of liability selected, also enforcing the security protocol which is paramount. Therefore only having a Strong Security Policy will not lower the premium, discount will be given for training the employees and reviewing security policy as per the risk, so timely review of security policy and preparedness of staff in case of a breach will lead to less premium as a breach can come from human error or employee negligence that will increase the risk resulting into breach/losses.