Cyber threats are rising — And so is India's cyber insurance market

Cybersecurity breaches have become a daily reality in India

Cybersecurity breaches have become a daily reality in India, with both government institutions and private sectors facing increasing threats. The recent surge in cyber-attacks of which the ransomware attack on the All India Institute of Medical Sciences (AIIMS) in 2023 was a notable one, has brought cybersecurity to the forefront of national priorities. As the digital landscape continues to expand, so do the risks associated with it, making cyber insurance the need of the hour.

In response, the Indian government has ramped up its budget for cybersecurity, nearly doubling its allocation from Rs 400 crore in 2023-2024 to Rs 759 crore in 2024-2025. This massive jump underscores the growing recognition of the need for more robust cybersecurity measures. A significant portion of these projects is being managed by the Ministry of Electronics and Information Technology (MeitY).

The situation is dire. India’s nodal agency for cybersecurity, the Indian Computer Emergency Response Team (CERT-In), handled a staggering 1.39 million cybersecurity incidents in 2022 alone. Among these, the largest chunk—875,892 incidents—was related to the mitigation of vulnerable services, emphasizing the scale and variety of cyber threats the country faces.

A new era of cyber insurance

With cyber risks on the rise, India's cyber insurance market is growing rapidly. Once a niche segment, cyber insurance is now a key tool for both businesses and individuals to manage the growing risk of cyber-attacks, phishing, and data breaches. A study published in October last year by Deloitte revealed that India’s cyber insurance market, worth an estimated $50–60 million in 2023, is expected to grow by 27–30 percent annually over the next five years.

Insurance companies are responding to this surge in demand with innovative products that cater to both individual and corporate needs. HDFC ERGO’s Cyber Sachet Insurance Plan, Bajaj Allianz’s Cyber Insurance Policy, and Tata AIG’s CyberShield and Cyber Risk Protector are just a few examples of the comprehensive coverage now available. These plans offer protection against a wide array of risks, including impersonation, cyber extortion, identity theft, and even cyberbullying.

Interestingly, some of these products are available for as low as Rs 3 per day, making them accessible to a broader audience. Industry experts attribute this increased demand to the rise in AI-driven frauds, where perpetrators use fake videos, voice clones, and even text messages to impersonate executives or family members.

Regulatory push and sectoral developments

The regulatory landscape is also evolving to keep up with the growing threats. The Securities and Exchange Board of India (SEBI), for instance, recently mandated that all SEBI-registered entities establish a Security Operations Centre (SOC) to continuously monitor security events and detect anomalies. Major exchanges like the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are setting up Market SOCs (M-SOC) to assist smaller regulated entities (REs) that lack the financial muscle or expertise to develop their own SOCs.

These measures, which fall under SEBI’s latest cybersecurity framework released in August 2024, are designed to ensure uniformity in cybersecurity protocols across the financial sector. The Digital Lenders Association of India (DLAI) is also making strides by developing a “fraud repository” for fintech firms, which will help streamline the detection and prevention of financial frauds across the sector.

Moreover, the implementation of the Digital Personal Data Protection (DPDP) Act has fortified the legal framework around data protection. This has created a stronger case for cyber insurance as businesses are now legally obligated to safeguard personal data. Violations of the DPDP Act can lead to hefty fines, making cyber insurance policies even more critical for companies looking to mitigate their risk exposure.

Future of cyber insurance in India

With cyber threats becoming more sophisticated, the future of India’s cyber insurance market looks promising. The exponential growth in digital transactions, coupled with the increasing digitization of government services, has only heightened the need for robust cybersecurity measures.

The Deloitte report paints a clear picture: as businesses continue to digitize and AI-driven threats rise, the demand for cyber insurance will only escalate. The rise of "sachet-sized" insurance products—smaller, more affordable policies—has made it easier for individuals and small businesses to protect themselves against the rising tide of cyber risks.