IRDAI charts out norms for personal cyber insurance cover

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Social distancing has proved to be one of the effective ways for fighting Covid-19. The new norm, however, has also led to a surge in digitisation which in turn has increased the risk of cyber attacks. According to statistics, cyber risks have accelerated by as much as 500% since the first lockdown was imposed in India in March 2020. There is an increase in coronavirus-themed spam, resulting in more infected personal computers and phones.

Moreover, people have exposed themselves to risks like never before with storing credit card details on a retailer’s website or use of non-encrypted websites, among other things. Realising the need for protecting online activities, the Insurance Regulatory and Development Authority of India (IRDAI) has suggested a model cyber insurance policy for individuals.

“An individual’s exposure to cyber risks is constantly increasing with increase in exposure to the digital world. Considering the dire need of cyber insurance for individuals, IRDAI has charted out some salient features, coverage and suggestions in its guidance document on product structure for cyber insurance which insurers can look to adopt. This document also talks about simplifying the existing products further and expanding their scope of coverage,” said TA Ramalingam, chief technical officer, Bajaj Allianz General Insurance.

The regulator has advised that general insurers may be guided by the model policy wordings for personal cyber insurance cover. “Standardisation of the policy wording is not desirable at this juncture keeping in view of the evolving nature of legislative frameworks in dealing with cyber risk, fast-growing digital ecosystem, increasing interconnectedness globally and complexity of IT systems and emergence of new risks,” IRDAI stated in a circular.

The model policy wordings have been welcomed by the industry. “Bajaj Allianz General Insurance was the first in the Indian insurance industry to introduce cyber insurance product for individuals which covers most of the features and suggestions given in the document. Cyber risks are continuously evolving and it’s always been our endeavour to stay relevant to customer needs. Hence, we will keep upgrading our product depending on the changing risk environment and requirement of our customers,” said Ramalingam.

Risks to be covered under model cyber insurance policy

Financial loss cover: This covers any financial loss to the policyholder as a result of a theft of funds due to unauthorised access to the insured’s bank account, credit or debit card or mobile wallets by a third party. It also covers financial loss as a consequence of the insured being a victim of cybercrime including phishing, email spoofing, vishing, hacking, skimming, smishing, card cloning and sim jacking.

Data restoration cover: It covers the costs incurred by the involvement of an IT expert after a cybercrime to restore the insured’s data or to decontaminate or clean the insured’s personal device from malware.

Cyber extortion cover: The product also covers cyber extortion loss that the insured incurs solely and directly as a result of a cyber extortion threat. The insured is however required to keep the terms and conditions of this cyber extortion cover confidential unless disclosure to law enforcement authorities is required.

Identity theft cover: It provides for defence costs that directly result from the identity theft of the insured by cybercrime.

Data breach and privacy breach cover: It covers defence costs and damages incurred by the insured as a result of a third party claim for data breach and/or privacy breach.

Media liability cover: The cover provides reasonable defence costs and damages lodged by a third party against the insured for any unintentional defamation, breach of copyright, title, slogan, trademark, trade name, service, mark, service name or domain name, or breach or interference of privacy rights, resulting from insured’s online media activities including media activities in social media.

The important point to note is that the limit of liability is stated against each item, which cannot exceed the threshold in case of any claim. Moreover, given the fact that people find submitting First Information Report (FIR) as a cumbersome task, IRDAI has also recommended that insurers need not ask for an FIR for losses below Rs 5,000 and the claim can be settled on the basis of an e-complaint on the National Cyber Crime Reporting Portal.