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Common Exclusions of Cyber Risk Insurance

By Finserv MARKETS - Jul 25,2019
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Cyber Insurance Exclusions

What better way to secure your company’s tech solutions and client data than to buy a cyber-insurance? The provisions under a cyber insurance plan offer coverage for IT theft, phishing, cyber extortion, email spoofing, cyberstalking, and third-party data breach. Several multi-national companies, especially those involved in the service sector, hold a large amount of client’s personal and confidential data. This data could be in the form of bank details, medical records, residential records, and other crucial personal information. Any security breach or hacking of this confidential data could lead to the filing of a lawsuit by the client against the company. Thus, it is important that a business has a robust cyber insurance plan to protect the business from such legal or financial liabilities. While most insurance providers offer digital insurance plans with maximum coverage against major cyber threats, there are certain exclusions in these plans that you need to be aware about.

Some Common Exclusions In Cyber Risk Insurances Are-

  • Bodily Injuries and Damages

Any bodily injuries or physical damages that are a direct or indirect outcome of a cybersecurity breach is not covered under a cyber insurance policy. Similarly, any emotional or psychological trauma faced due to a cyber threat is not covered in cyber risk insurance.

  • Infringement Of Copyright, Software, And Patent

Cyber insurance does not cover the infringement of intellectual property. If a business wants to protect its software solutions, patents, and copyrights, it will have to buy a separate intellectual property insurance.

  • Streaming Of Obscene/Immoral Services

Any services availed by the insurance holder that are classified as immoral, pornographic, racist or extremists and the subsequent risks associated with them are not covered under cyber insurance.

  • Government Mandates

Any mandates stated by the government or a public authority that can pose a potential financial or legal risk to the cyber security of a company are not covered in a cyber insurance policy.

  • Losses Due To Power Outages

Any data loss due to power outages or fault in external networks like the internet or telecommunication cables is excluded from cyber risk insurance coverages.

  • Claim for Laptops and Electronic Devices

If an employee damages or loses a company laptop or any other portable data storing electronic device, the losses incurred cannot be claimed under a cyber insurance policy. However, some insurance providers offer provisions for loss/damage of unencrypted electronic devices.

  • Failure to Take Standard Security Measures

To secure critical client data, it is expected out of businesses to maintain ‘minimum required practices’ for security measures. Any negligence in maintaining standard cyber security measures to protect company or client data and the legal and financial losses incurred as a result of it, are excluded from a cyber insurance policy.

  • Cyber Terrorism

Any acts of cyber terrorism or electronic terrorism are excluded from a typical cyber insurance plan. Additionally, any cyber security threats that are a direct/ indirect outcome of wars, invasions, or insurrection are not covered under cyber-risk insurance.

Some Parting Thoughts

Although the above-mentioned points are just a few common exclusions in a given insurance policy, the list can get exhaustive depending on the policies, terms, and conditions of different insurance providers. Make sure you read carefully through the insurance contract to know about the different inclusions and exclusions in a cyber insurance plan.

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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522