Aman Gupta-led wearables startup boAt recently suffered a data breach, where the personal details of over 7.5 million customers were compromised. Experts weren’t surprised as all warnings by them with regard to rising risks did not lead to consumer data-dealing companies taking remedial steps.
In the recent past, there has been a data breach at Indian Hotels Company, where personal details of around 1.5 million people were compromised. Other such breaches were Aadhaar data leak of 815 million citizens, a malware attack in AIIMS Delhi, etc. According to a report by Surfshark, India ranks 5th in the list of countries with most data breaches — 5.3 million leaked accounts in 2023.
Such incidents have forced large and small companies to opt for cyber insurance as a key part of risk management. And, capitalising on the demand are insurtech startups offering cyber insurance and cybersecurity startups that help insurance companies assess and underwrite the cyber risk of their customers.
Onsurity, Plum, InsuranceDekho, Safe Security, Policybazaar and BimaKavach are some of the segment players, competing with established peers like HDFC ERGO General Insurance, Bajaj Allianz, ICIICI Lombard and SBI General Insurance.
According to a Deloitte market report, India’s cyber insurance market is currently valued at $50-60 million, poised to grow at a staggering compound annual growth rate (CAGR) of 27-30% in the next 3-5 years. Further, the global cost of cybercrime is also expected to increase from $9.22 trillion in 2024 to $13.82 trillion by 2028, according to a report by Statista.
The opportunity
The startups claim that they are witnessing a paradigm shift in companies’ perception of cyber risk insurance. They are recognising it as an integral component of strategic risk management. According to the US’ Federal Bureau of Investigation (FBI) 2022 report, India ranks fourth amongst the top five countries by the number of total cybercrime victims. “With India at the forefront of technology-led growth, cyber crimes will continue to increase,” Pankaj Goyal, COO and Cyber Insurance Lead at Safe Security, told FE. He added that we also have new regulations today that impose fines on organisations that fail to maintain compliance, which further encourages companies to purchase cyber insurance.
Experts say that today many companies are allocating a budget for both cybersecurity and cyber insurance. Typically in evolved ecosystems such as the US, cybersecurity and insurance spend is between 2% and 8% of a company’s IT spend.
In India, industries heavily involved in digitisation, such as IT, pharma and manufacturing, seem to be the early adopters of cyber insurance, delegating a similar budget. However, no business is too small for cyberattacks and thus insurtech startups are introducing the idea of cyber insurance to SMEs and MSMEs as well. “Small companies that utilise technology are often more susceptible due to limited resources for robust cybersecurity measures,” Yogesh Agarwal, founder and CEO, Onsurity, said. In October last year, Onsurity raised $24 million in Series B funding from International Finance Corporation, Nexus Venture Partners, and Quona Capital.
He added that these risks are not only difficult to predict but also challenging to prevent entirely. Onsurity launched its cyber insurance product about 7 months ago, and the response has been quite encouraging, it claims. “The industry has seen remarkable growth, with more than a 25% increase over the past three years,” Agarwal added. The startup’s cyber insurance offering for businesses starts at an annual premium of Rs 50,000 for Rs 1 crore cover.
Insurtech startup InsuranceDekho, which introduced cyber insurance in August 2023 to address the growing digital risks faced by MSMEs and large corporations, however, feels that many businesses are yet to understand the potential impact of cyber incidents on their operations and finances, leading to hesitancy in opting for cyber insurance. “Despite these challenges, we remain committed to raising awareness about cyber risks and the benefits of cyber insurance,” Sharad Bajaj COO of InsuranceDekho said.
InsuranceDekho is backed by investors such a Goldman Sachs, TVS Capital, Mitsubishi UFJ Financial Group, BNP Paribas, LeapFrog Investments and Beams Fintech Fund.
Solving for low awareness
“The entire segment of cyber, which includes cybersecurity and cyber insurance, tends to be viewed as a cost, and the companies believe that they have nothing significant to lose, so why spend money,” Pankit Desai, co-founder and CEO of Sequretek, a cybersecurity startup said.
Despite the escalating frequency of cyberattacks, many businesses also remain in denial about the potential threats they face. “Therefore, a key aspect of our strategy moving forward is to drive awareness and educate businesses about the necessity of cyber insurance,” Agarwal said.
The pace at which firms and individuals achieve digital maturity also varies. So, those that are digitally mature are likely to recognise the importance of cyber insurance earlier than others. “The increasing complexity of cyber threats might make it difficult for individuals to understand the need for cyber insurance and even the scope of the kind of risk profiling they need to opt for,” Sahil Chopra, AVP – Growth and Marketing, Inflection Point Ventures told FE.
However, like most experts, Chopra believes that there is a noticeable trend of more startups entering the cyber insurance space. “Many cyber insurance startups are adopting a ‘prevention-led’ approach, combining cybersecurity tools with insurance coverage to improve risk transfer,” he added.