New Delhi [India], July 12: The insurance sector is a vital component of the financial services industry, responsible for providing comprehensive risk management solutions to individuals, businesses, and organisations. By offering a wide range of policies—covering everything from health, property, and motor insurance to emerging areas like cyber, pet and agricultural insurance—insurers help protect policyholders from unforeseen financial losses. In return for the payment of premiums, insurers assume the risk, providing financial compensation in times of need. However, the increasing digitization of insurance services has introduced a new and complex challenge: ensuring the protection of sensitive customer data from cyber threats. With the insurance sector handling massive amounts of personal, financial, and health-related information, it becomes an attractive target for cybercriminals. In countries like India, where the insurance penetration rate is only 3.7% compared to the global average of around 7%, the need to maintain trust is especially critical. Customers are difficult to acquire in such a market, and any data breach or misuse of information can lead to significant reputational damage, financial losses, and erosion of customer confidence. Therefore, beyond offering policies and processing claims, insurers are increasingly expected to take responsibility for cybersecurity and data privacy. Companies like Bajaj Allianz General Insurance and ICICI Lombard have already recognised the urgency of this issue by offering cybercrime insurance policies. These include coverage for financial losses due to cyber incidents and services such as data restoration, privacy protection, and liability coverage for SMEs. As cyberattacks become more frequent and sophisticated, the risks to the insurance industry continue to grow. In Q1 2025 alone, cyberattacks surged globally by 47% compared to the same period in 2024. Ransomware attacks increased by 93% in 2023, and the average number of weekly attacks per organisation rose to 2,200, up from 1,287 in 2022. The projected global cost of cybercrime is expected to reach a staggering $10.5 trillion annually by 2025, according to Cybersecurity Ventures. Meanwhile, the average cost of a data breach reached $4.45 million in 2023, with phishing attacks accounting for 41% of all incidents. These statistics underscore the growing need for insurers to invest in advanced cybersecurity measures, both to protect their infrastructure and to reassure customers. Specific sectors have been disproportionately affected. The healthcare sector saw a 55% increase in cyberattacks, with the average cost of a breach reaching $10.93 million, while financial institutions faced 1,200 attacks per week on average. Government bodies were also targeted, with ransomware attacks rising by 95%. Emerging threats, such as AI-driven attacks and IoT-based vulnerabilities, are anticipated to grow by 50% annually through 2025. This escalating threat landscape calls for a multi-layered cybersecurity strategy that includes data encryption, secure APIs, multi-factor authentication, employee awareness training, third-party risk management, and strong incident response planning. In India, several high-profile cyber fraud incidents have demonstrated the real-world implications of poor cyber hygiene. For example, a 61-year-old retired bank manager from Pune lost ₹2.2 crore over 10 months to scammers posing as government officials. In another case, a 58-year-old man from Telangana was duped of ₹5.81 lakh after being tricked into paying fake processing fees. Similarly, a retired woman from Thane lost ₹26.6 lakh to a fraudulent insurance scheme, and a 71-year-old man from the same city lost ₹72 lakh after being repeatedly misled by fraudsters. These cases, along with incidents involving students and businessmen, highlight the importance of consumer awareness, verification of policy credentials, and cautious handling of digital transactions. As digital adoption continues to rise in the insurance sector, the protection of customer data and systems becomes not just a technical necessity but a business imperative. Companies that fail to address cybersecurity risks may face loss of trust, regulatory penalties, and stagnated growth. On the other hand, those that invest in robust security frameworks and customer education will not only protect their assets but also strengthen their market reputation and long-term customer relationships. In an era where trust is currency, cybersecurity in insurance is no longer optional—it is essential.
The insurance sector possesses several cybersecurity strengths, including well-established policies, skilled professionals, strong infrastructure like firewalls and intrusion detection systems, and regular audits to identify vulnerabilities. Employee training programs further reduce the risk of phishing and social engineering attacks. However, weaknesses persist, such as the absence of a unified security strategy, limited budgets, outdated technologies, and poor access control management. A lack of awareness among employees also poses significant internal risks. On the opportunity front, emerging technologies like AI-driven threat detection, growing demand for cybersecurity services, and increasing investment in training offer potential for enhanced security and market advantage. Compliance with new regulations and collaboration with other organizations can also improve defences. However, the sector faces serious threats, including more sophisticated cyberattacks, frequent data breaches, a shortage of cybersecurity talent, and insider threats. Rapidly changing regulations add further complexity. To stay resilient, insurers must prioritise proactive strategies, ongoing employee education, and advanced technology adoption while maintaining strong regulatory alignment and trust with customers.
Note: The Insurance sector is under attack, and we need to act soon, otherwise one day the insurers will need to reposition their product in the minds of the customers- Vertical Admin at Bajaj Allianz General Insurance- Lakshya Mehta
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