While cyber crime has been a constant threat over the past decade, with advanced technology the perils are deeper with severe implications. Cyber-attacks affect all categories of web users including consumers, corporates, and enterprise giants; however, small businesses are more vulnerable and are more likely to be under a cyber-attack. They are a treasure trove of valuable data both financial and personal. Their security systems are relatively weak and their resources often are inefficient to defend against such attacks as large corporates do. Thus the importance of cyber insurance for startups has increased significantly.
Startups are agile, fast-moving businesses, they cannot afford business losses; even a short downtime can lead to severe bleeding in their system. Cyber coverage insurance issued enables startups to protect themselves against such cyber attacks.
Importance of cyber insurance:
Here are some of the scenarios when a cyber insurance policy can come in handy:
1. Downtime in business due to cyber attacks:
Agility is an essential quality for small businesses and startups to succeed amidst competitive businesses. It is tough to achieve business continuity and heightened achievement when the hackers are constantly waiting to catch you at a vulnerable moment.
There are specific cyberattacks such as distributed denial of services (DDOS) and ransomware attacks which bring the entire business operations to a grinding halt. While you may invest inappropriate services that stymie malicious cyber attacks; cyber insurance can protect you and provide you compensation for the quantum of funds lost during the business downtime.
2. Compromised proprietary information:
There are times when precious information of customers and financial data is compromised. Sometimes even patented or proprietary ideas can leak; essentially all sensitive information is only as strong as your firewall. Hackers use the information for the sale of data or extortion against the safe return of data.
Thus, a cyber insurance policy will provide you with cover against loss from a monetary perspective. However, it may not be able to compensate for the actual implications of the loss of sensitive data.
Additional Read: India’s cyber laws every organisation should be aware of
3. Reduced confidence among customers:
A startup business that is subject to cyber attacks may be subject to a steep loss of confidence among customers. Sometimes, it may be very tough for businesses to resurrect their reputation; cyber insurance will provide you with enough funds as part of its settlement which can be used for hashing and salting of sensitive information including Aadhaar numbers, bank account numbers, email addresses, passwords etc.
By doing so your files despite being compromised may not be vulnerable as the hackers may not be able to interpret the data and make sense of them to convert them into currency.
4. Complete hacks:
Many of the start-ups often work with small teams where they hold data in communal digital spaces. This enables employees to access sensitive information at ease. However, the hackers can merely hack one of the employees’ accounts and become privy to the entire data and operations of the company. This could potentially bring the entire business to a standstill for a prolonged period, thereby forcing the company to die a slow death. Cyber insurance coverage will ensure that such startups can financially withstand cyberattacks and data breaches.
What type of businesses should consider cyber insurance?
Any company that stores sensitive customer data digitally and works with intellectual property should consider availing cyber insurance. If the reliance on the online component is critical for business operations and revenue, for example, e-commerce, trading platform etc., then such companies should also consider availing cyber insurance.
Additional Read: Why Cyber Insurance plan is a must have?
What should you look for in terms of cyber insurance coverage?
Cyber insurance coverage should offer coverages for these specific situations:
- The hacking of office computers leads to exposure of sensitive information.
- Legal action is undertaken by customers upon leakage of personal information or health-related information.
- Payment towards legal services to facilitate state regulations.
- Payment towards extortion to recover sensitive locked/encrypted data.
- Compensation towards business outages or downtime.
Some of the exclusions under cyber insurance are:
- Property damage or hardware replacement is not covered.
- Business losses were caused during the downtime.
- Charges incurred for third party deployment for handling redundant business operations involving reasonably sensitive data.
All about cyber insurance:
Cyber insurance is a new phenomenon that is still in the nascent stages in India. The size of cyber liability in relative terms in the context of the insurance market is quite small when compared to other business lines globally. Research conducted by members of the IRDAI observed that many companies continue to rely to a large extent on traditional insurance to mitigate losses that emerge from cyber attacks.
Despite understanding the severity and scale of damage that such exposures can cause; they perceive cyber insurance coverage as ambiguous and extremely limited in the scope of coverage. So, they remain unconvinced about the ability of cyber insurance coverage of its ability to provide adequately recover from the steep losses.
The experts in this field believe that it is important to start with bite-size insurance and create enough awareness to encourage startups to avail the of cyber insurance; which offers a more comprehensive cover against cyber attacks.
Cyber-attacks have been on the rise over the past decade, with the digitization of every aspect and advancements in technology, companies are becoming more vulnerable. There is a need for a combinational strategy – a prudent mix of cyber insurance and building tech defence; that can help cope with any damaging cyber-attacks. Thus, only building a strong tech defence can be counterintuitive as the hackers have in the past been one step ahead of innovations.
You can visit SecureNow to gain comprehensive information and to know about the importance of cyber insurance policies. Like in the case of all other policies, it is important to understand the inclusions, and exclusions of the policy. Do a comparative analysis of features, benefits, premiums etc., to avail the one that offers the best coverage within your budget and aligns with your requirement.
For quick access to products and insurance-related information, register on SecureNow App