BHUBANESWAR: 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.
“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 cyber security. 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.