IRDAI panel suggests cyber liability insurance: What kind of losses can be covered

A committee set up by the Insurance Regulatory and Development Authority of India (Irdai) has recommended the introduction of a cyber liability policy. This policy will protect the policyholders from cybercrimes.

In October last year, the IRDAI had set up a committee for cyber liability insurance. The committee has submitted its report with recommendations for the preparation of cyber liability insurance.

According to the committee report, "Cyber insurance policies, currently available, address the requirements of individuals reasonably well. But there are some areas in the product features and processes which need improvement. Recommendations made to fill in the gaps include the need for flexibility in the insistence of a First Information Report (FIR) at the time of claims, clarity in exclusion language relating to compliance with reasonable practices and precautions, targeted intrusion, unsolicited communication and the need for coverage for bricking costs etc."

Here is the list of losses that will normally be covered under a cyber-insurance policy:

1. First Party Losses: Direct Financial Loss, Data recovery, Business Interruption Cover and Mitigation Costs Cover,

2. Regulatory Actions: Costs of Regulatory actions and investigations, civil fines and penalties and Defence Costs.

3. Crisis Management Costs: Forensic Expert Cover including security consultation, Reputation Damage Cover, Legal Costs Cover for matters including notification, coordination with service providers, strategy etc., Credit and Identity Theft Monitoring Cover, Cyber extortion/ Ransomware Cover, Operation of a 24x7 Hotline, Cyber Stalking, Counselling, Information removal and pursuing action.

4. Liability Claims: Legal liability/damages directly arising from privacy or data/ security breach, Defamation, Intellectual Property Right (IPR) infringement and Defence Costs, as per the committee report.

Amid the COVID 19 pandemic, the regulator saw rising incidences of cyberattacks and a growing number of high-profile data breaches. It felt that cybersecurity is the most important need for all sectors today to address the numerous risks posed by cyber-attacks.

The big cyber worries for an individual

Individual cyber insurance policy is the one which is designed to meet the requirements of an individual as against an organisation. What are the big cyber worries for an individual?

As per Swiss Re’s global survey, the top four cyber risk scenarios that people worry about most are:

1 Illicit access of financial credentials (a hacker gets access to your online banking details and might therefore be able to steal money)

2 Identity theft (an attacker steals your digital identity to purchase goods or services online in your name)

3 Data loss due to a technical issue (your personal data gets deleted by a virus or software glitch)

4 Illicit publication of personal data (somebody else publishes your private pictures online)

These are the four main areas where customers are receptive to the idea of a cyber insurance policy that will cover them against some of the consequences of these fears coming true.

According to the committee report, "The number of internet users in India is currently estimated at 700 million. India is ranked as the second-largest online market worldwide in 2019, coming second only to China. The number of internet users is estimated to increase in both urban as well as rural regions. This number is increasing rapidly so also is the number of users of online banking."

Individual cyber insurance cover

The report states the following salient features of the individual cyber insurance policy.

1. Theft of funds: Provides protection in respect of theft of funds due to Cyber Incident or Hacking of insured’s Bank account, Credit/Debit card and/ or Mobile wallets by a Third Party.

2. Identity Theft Cover: Provides protection in terms of Defence cost for claims made against insured by third/affected party due to identity theft fraud, provides expense to prosecute perpetrators and other transportation costs.

3. Social Media Cover / Personal Social Media: Provides protection in terms of Defence cost for claims made against insured by third/affected party due to hacked social media account of insured, provides expense to prosecute perpetrators and other transportation costs.

4. Cyber Stalking / Bullying: Provides expenses to prosecute the stalker.

5. Malware Cover / Data Restoration Cost: Provides coverage for data restoration cost due to malware.

6. Phishing Cover: Provides protection in respect of financial losses as a result of a phishing attack and provides expense to prosecute perpetrators, as per the committee report.

7. Unauthorised Online Transaction: Provides protection against fraudulent use of bank account, credit/debit card, e-wallet by the third party to make online purchasing over the internet.

8. Email Spoofing: Provides protection in respect of financial losses as a result of spoofed email attack and provides expense to prosecute perpetrators.

9. Media Liability Claims Cover: Provides coverage for defence costs in third party claims due to defamation or invasion of privacy due to Insured’s publication or broadcasting of any digital media content.

10. Cyber Extortion Cover: Provides protection for extortion loss as a result of Cyber extortion threat and provides expense to prosecute perpetrators. Report of the Working Group to study Cyber Liability Insurance, as per the committee report.

11. Data Breach and Privacy Breach Cover: Provides indemnity for defence costs and damages in respect of claims lodged by a Third-party against the Insured for Data Breach and or Privacy Breach.

Source: Live Mint