Banks up the ante to cover cost of cyber attacks

'A sudden rise in frauds of higher magnitude forced us to consider substantially much higher risk cover than the basic banker’s indemnity policy and blanket bond,' said a top public sector banker.

Published: 21st September 2018 09:52 PM  |   Last Updated: 21st September 2018 09:53 PM   |  A+A-

cyber crime, Hackers, Cyber bullying
Express News Service

BHUBANESHWAR: Having paid heavily for cyber attacks like the one on Cosmos Co-operative Bank, lenders are increasingly opting for higher insurance cover to protect their bottom line. About 20 banks have so far purchased cyber insurance covers, while another six to seven public sector banks will have a cover in place in the next one month, according to an insurance broker.

ALSO READ: 15,000 transactions in 2 days, Rs 94 crore siphoned off from Pune-based Cosmos Bank

“A sudden rise in frauds of higher magnitude and scale, such as the Rs 11,400 crore PNB fraud and the Cosmos fraud of nearly Rs 100 crore, has forced us to consider substantially much higher risk cover than the basic banker’s indemnity policy and blanket bond, which various banks have right now,” said a top public sector banker.

Given the strong personal data privacy protection norms and stringent penalties for infringement, experts say that banks today do not have a choice concerning a massive revamp of cybersecurity. To put things into perspective, the Reserve Bank of India has imposed a total penalty of Rs 1 crore each on the Union Bank of India, Bank of India and Bank of Maharashtra earlier this month for delay in detection and reporting of fraud in some accounts.

Soon after this, one public sector bank bought a cover of $100 million, while most private sector banks are investing $10-50 million. “We have also seen an increase in enquiries to hike limits, sometimes to even double the limits,” reasoned Sanjay Kedia, Country Head and CEO, Marsh India Insurance Brokers Pvt Ltd. Besides, lenders are also looking to increase cover against delinquencies by their employees and are exploring options for purchasing professional indemnity insurance. Overall, enquiries are up by 23-30 per cent and is likely to spike further, Kedia noted.

Questioning preparedness of the banks in case of a massive cyber breach, Kedia said almost all banks in India buy a Bankers Blanket Bond (BBB) insurance policy for an amount as low as Rs 2 crore going up to Rs 25 crore. Typically, these insurances account for 5-10 per cent of the total insurance spend of a bank and considering the size of operations, these amounts are grossly inadequate, and therefore, premiums and deductibles are also low. In contrast, it is common to see insurance covers with limits of $100 million to $500 million and more for similar-sized banks globally. Interestingly, the deductibles in such global insurance programmes are around Rs 5 crore, which is the size of insurance purchased in most cases in India.

Stay up to date on all the latest Business news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)

Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp