Last week, over 5 million email IDs and passwords of Gmail users were reported to have been hacked. With the rising threat of data breach emerging as a major risk area for companies, general insurance companies are offering cover against financial losses arising out of such data loss. In the last four months, about 35 companies have bought such insurance covers of up to Rs 300 crore.
At least three leading general insurers — Tata AIG, ICICI Lombard and HDFC Ergo — have already launched insurance schemes
offering cover against cyber risk, and others like Bajaj Allianz and Reliance General Insurance are working on such a product in view of the rising demand. While the maximum cover provided so far is Rs 300 crore, insurers say they can increase it to Rs 600 crore depending on the requirement of the customer.
When HDFC Ergo launched its standalone cyber security policy a couple of years ago, it found only a couple of customers in the first year. But in the last few months, it has seen a sharp rise in the demand for such schemes. Both Tata AIG and ICICI Lombard launched their policy this year. While insurers declined to share the names of companies that have taken the policies, they said most of the customers are BPOs and IT companies which handle third party data. The list also includes banks and financial institutions.
The policy does not come cheap. The annual premium for a Rs 10 crore cover is Rs 12-18 lakh, and Rs 2.4-3 crore for a Rs 300 crore cover, depending on whether the data belongs to customers in India or abroad.
“If the data loss involves Indian customers, the financial downside is less and hence it means a lower premium as compared to cases where the data involves customers in the US and UK. The law in the US and UK requires that in case of data breach, the company has to inform all the customers, which involves huge cost. In India, there is no such requirement and customers are only required to be compensated if they sue the company,” said Sushant Sarin, head of liabilities, at Tata AIG General Insurance.
“The premiums are high because the risk is very high. It is not just the loss that the company suffers financially but its about data records… mostly BPOs and IT companies take the policy as they handle third party data,” said Mukesh Kumar, ED, HDFC Ergo General Insurance.
Indicating the magnitude of the risk, a Delhi High Court-commissioned report released earlier this year said cyber crimes cost India about Rs 24,630 crore in 2013.
Insurers said they have seen a sharp jump in enquiries and requests for quotation from companies. “As India goes digital and e-commerce takes off, the cyber risk will increase. Therefore, there will be a higher demand for such product,” said Sanjay Datta, chief of underwriting and claims, ICICI Lombard.
It is not just the big companies that are buying the product. Even mid- and small companies in these high risk sectors are buying these as most of the policies that have been sold are for insurance covers between Rs 5 crore to Rs 50 crore. Insurers said hospitals, schools and retailers who have sufficient amount of data can also take the policy for a cover of about Rs 1 crore.
Meanwhile, insurers said companies that face a higher threat of cyber crime are also hiring “certified ethical hackers” who help them mitigate such risks.