Today, new Cyberthreats are emerging daily. Most businesses, small and big, have been subject to Cyberattacks in the last few years. Today, most businesses have an online presence making them more susceptible to Cyberattacks. The cost of data breach incidents has also increased exponentially. As per an IBM Study, the average cost of a data breach incident increased to Rs11.9 Crores in 2017, an increase of nearly 8% as compared to 2016.
Additionally, it does not look like that the frequency and magnitude of these cyberattacks is going to reduce any time soon. Cyberthreats are one of the biggest risk facing companies today.
All these factors make it necessary for CEOs to be proactive and obtain a comprehensive Cyber Liability Insurance Policy for their organisations.
This article will discuss the factors impacting the cost of a Cyber Insurance Policy in detail.
What is a Cyber Risk Insurance Policy?
A Cyber Risk Insurance Policy also known as a Cyber Liability Insurance Policy or a Cyber Security Insurance Policy is a type of Insurance Policy which reimburses the Insured for losses arising out of breach of the Insured’s Network’s Systems.
Cyber Insurance Coverage provides cover for both First Party Liability and Third-Party Liability. First Party Cyber Liability Insurance Coverage protects the company itself and pays for costs associated with Cyberattacks which impact the Insured Company such as E-Theft Loss, E-Communication Loss, E-Business Interruption, E-Vandalism etc.
Third Party Cyber Liability Insurance Coverage provides cover for the losses suffered by third parties as a result of a breach of the Insured Company’s network systems. Third Party Liability Exposures range from Disclosure Liability, Conduit Liability, Impaired Access Liability and Reputational Liability.
What are the Factors affecting the Cost of a Cyber Liability Insurance Policy?
Some of the factors affecting the cost of a Cyber Security Insurance Policy are as follows:
Policy Limits
Policy Limits are the biggest factor impacting Cyber Liability Insurance Cost. Higher Policy Limits means that the Cyber Insurance Cost will be higher while lower Policy Limits means that the Cyber Insurance Cost will be lower.
There are 2 types of Policy Limits in a Cyber Insurance Policy:
Any One Accident (AOA) Limit: AOA Limit in a Cyber Insurance Policy specifies the maximum amount that the Cyber Insurance Company will pay in case of a single cyber claim.
Aggregate (AOY) Limit: AOY Limit in a Cyber Insurance Policy specifies the maximum amount that the Cyber Insurer will pay in total towards all the claims during the Policy Period.
So, higher the AOA and AOY Limits in a Cyber Security Insurance Policy, higher will be the Cyber Insurance Cost (Premiums).
Industry Characteristics
The Industry in which the Insured Company operates in is also an important factor in determining the Cyber Insurance Cost. High risk industries and Industries susceptible to Cyberattacks will have higher Cyber Insurance Cost while low risk industries will have lower Cyber Liability Insurance Premiums.
Nature of Data Handled by the Company
The nature of data handled by the company also determines the Cost of Cyber Liability Insurance Policy. Companies handling sensitive data will have to pay higher higher premiums for their Cyber Insurance Policy while small businesses with limited customer base and handling non-sensitive data will have a lower cost for their Cyber Insurance Policy.
For example: If the company handles personally identifiable information, credit card information, medical records, their Cyber Liability Insurance Policy Cost will be much higher than the company which doesn’t store and deal with such sensitive information.
Number of Employees
The number of employees working for a company are also an important factor in determining the Cost of Cyber Insurance Policy. The reason is that higher the number of employees working for a company, greater is the risk of a breach of network system.
Revenue of the Company
The Cost of a Cyber Security Insurance Policy will be greater for firms with higher revenues as compared to businesses with lower revenues. The reason is that Cyber Criminals will normally target larger companies as there is a greater likelihood of getting confidential and important information from such businesses. Thus, bigger firms are an attractive target for Cyber Criminals which automatically makes the cost of Cyber Insurance Policy higher for such companies.
Deductibles
Deductibles in a Cyber Liability Insurance Policy is the amount of loss that the Insured Company itself will bear out of its own pocket before the Cyber Insurance Policy needs to make the claim payment. Therefore, Cyber Insurance Policies with higher deductibles will cost lesser than Cyber Insurance Policies with lower deductibles.
Territory and Jurisdiction Exposure
Territory and Jurisdiction Exposure of a Cyber Security Insurance Policies are also important in determining the cost of Cyber Insurance Policy. If the territory and jurisdiction of the Cyber Liability Insurance Policy is limited to only India, the Cyber Insurance Cost will be much lesser. However, if the territory and jurisdiction of Cyber Insurance Policy covers exposure in USA, the cost of Cyber Insurance Policy will be much higher because the quantum of loss is expected to be much higher for firms having exposure to USA.
Cybersecurity measures within the Company
Finally, the last and one of the most important factors determining the cost of a Cyber Insurance Policy are the Cyber Security measures implemented within the company. When purchasing a Cyber Liability Insurance Policy, the company will have to give information regarding the Security measures that have been implemented.
Measures such as installation of firewall, password enforcement policy, Business Continuity Policy, malware protection measures, encryption and multi-factor authentication, if implemented, will lower the cost of Cyber Insurance Policy.
What is the cost of Cyber Insurance Policy in India?
The cost of Cyber Insurance Policy in India is very reasonable as compared to Cyber Insurance Premiums in developed markets in Europe and USA.
A Cyber Insurance Policy with a Sum Insured of Rs1 Crore with a worldwide territory and jurisdiction exposure and a deductible of Rs10 lakhs costs around Rs2 lakhs annually in India.
This figure might vary depending on the industry and the nature of the data handled by the company seeking Cyber Liability Insurance Policy.
Final Take
Choosing appropriate Cyber Insurance Coverage is extremely important for an organisation as inadequate coverage means that the company will have to bear losses out of its own pocket.
Thus, it is important to be aware of the costs of latest data breach incidents and adjust your Cyber Insurance Coverage accordingly. Additionally, you can compare the coverages and limits obtained by your peers in the industry before deciding on the same for your Cyber Insurance Policy.
Finally, it is extremely important to avail the assistance of an experienced Cyber Insurance Broker to obtain comprehensive coverages and competitive premiums for your Cyber Insurance Policy.
If you wish to purchase a Cyber Insurance Policy, you can reach out to us at insurance@qian.co.in or call us on 022-22044989.
- What is a Cyber Insurance Policy?
- What is Cyber Threat or Cyber Risk?
- On Security Insurance Necessity For Businesses
- What does a Cyber Insurance Policy Cover?
- What kind of losses does a Company suffer on account of Cyberattacks and Security Breaches?
- What is the average Cost of a Cyber Incident?
- What are the First Party Liability Coverages under a Cyber Liability Policy?
- What are the Expenses Covered under a Cyber Liability Policy?
- What are the Third Party Liability Coverages covered under a Cyber Liability Insurance Policy?
- Cyber Security Insurance Policy (Why Does It Matter?)
- What are the Exclusions under a Cyber Liability Insurance?
- Cyber Insurance Policy Cost (What is reasonable?)
- Get Best Quotes for Cyber Insurance Policy with Qian