Banks rush for cyber fraud cover as digital payments rise

A surge in cyber threats amidst increasing digital transactions boosted by the demonetisation of high-value notes in November last year have forced banks to increasingly seek cyber insurance and cyber liability insurance to cover risks.

While there are various types of cyber insurance covers available in the market, it is the cyber liability insurance, which is mostly in demand by banks, say insurers.

In one of the biggest ever breaches of financial data in the country, customers of 3.2 million debit cards belonging to different banks were recently hit by cyber frauds where their ATM details were compromised.

Several victims even had reported unauthorised usage from locations in China.

The banks worst hit by cyber hacks include SBI, Bank of Baroda, HDFC Bank, ICICI Bank, YES Bank and Axis Bank.

Bank of Baroda, which had seen around 1 lakh of its debit cards being compromised in the recent episode, is also keen to go for such insurance covers in future.

The country's largest lender State Bank of India (SBI), which fell victim to cyber frauds some time back, is now considering insurance to protect its 300 million customers.

Insurers, with a mere Rs60-crore cyber insurance base, however, are not yet fully equipped to cater to the huge demand for cyber liability insurance. On the other hand, with increasing digital transactions, cyber threats are also rising for banks.

Non-life insurers that provide cyber insurance cover include New India, National, ICICI Lombard, Tata AIG, HDFC Ergo and Bajaj Allianz.

While banks claim to provide maximum security to IT systems, the rising number of digital transactions force banks to consider availing cyber insurance cover for their customers.

With the cyber security risks increasing and with no ready insurance cover available to meet customer requirements, banks may look to international insurance intermediaries that structures liability covers for various global and Indian companies.

PSU banks although have not yet commenced buying cyber insurance. However, after the recent issue, related to hacking of debit cards in the country, PSU banks as well are beginning to ask questions and are exploring cyber policies.