Cyber Insurance – Why it Makes Sense in 2019 & Beyond

There are nearly a million new malware attacks every day and 62% of these attacks are carried out on small and medium business enterprises.  It takes nearly 200 days to even discover that a data breach has occurred!

In the modern internet era, it is data everywhere.  Data is stored, retrieved and transacted across businesses and industry.  A strong IT infrastructure at times appears too weak in the face of the onslaught of cybercriminals and hackers. Cyber security related issues are becoming a big source of threat, which can either make or mar the future.   The after-effects of a data breach can be daunting to overcome and painful to recover from.  Loss of face, customers, pride and confidence are some of the immediate reactions.   The financial loss, compensation, and legal issues are the final nails on the coffin.

Estimated Loss sustained during wannacry outbreak

During May 2017, wannacry ransomware outbreak made companies lose more than $4 billion in just under a week, infecting over 30,000 machines across the world.  We will not delve further into the intricacies of the vulnerability or the technical details behind it, but rather focus on how cyber insurance can help companies tackle such attacks and overcome them with peace of mind.

How does Cyber Insurance help?

Data breach or loss or leakage of customers’ personal data is ground for hefty penalties in several countries.  Privacy of data is to be ensured at all costs.  Therefore, to minimize losses, under cyber insurance policies, insurance companies provide the services of a crisis-management team, (experts in cyber security), immediately when a data breach is noticed.  The crisis management team arrests the further slide of data, plugs loopholes in the system, attempts to repair and rebuild company reputation and estimates the losses suffered or the costs associated with the breach.

Cyber liability cover gives both First-party and third-party.  First party coverage is the loss and expenses sustained by the holder of the policy, while third-party coverage protects victims of data theft or other cyber-crimes. Cyber insurance helps a company cover the costs of compensation, penalties and the expenses associated with data protection and data retrieval.  Apart from this, claims arising out of the failure of the victim to secure personally identifiable information of a third party are also covered.  Regulatory actions, privacy breach and failure to detect or disclose a security failure are some of the other issues covered under cyber insurance.  Even the notifications, public relations exercise (For example, informing customers not to panic or that their data and money is safe etc.), legal guidance are all included in the coverage.

The outage period or interruptions and the loss sustained due to such interruptions are covered.  Ransomware infections lock a computer and demand a ransom amount to get them ‘unlocked.’  This ransom payment is also covered under cyber insurance.

The outlook for the next decade

As we get more and more electronically connected, cyber threat is real and is here to stay.  It all depends on how an organization copes up with it.  The effort should be to minimize the financial and other implications of the cyber attack.  The ability of the organizations to make informed decisions prior to the attack and their preparedness for facing any eventuality is the key to successful crisis management.  An appropriate cyber insurance policy will help you tide over the crisis with ease.

At NAIB, we know the importance of sensitive data and how it affects your business interests.  Our comprehensive range of cyber security schemes covering network security, cyber liability and privacy for first and third party risks shall help you sail through the risks associated with cyber threats at competitive rates.

5 Questions to Ask Before Purchasing a Life Insurance Policy

       –  Savitha Shetty

Buying a life insurance policy is an important financial decision. Life insurance policies, as the name suggests, are long term contracts. Hence before signing up for something that essentially lasts you a lifetime and beyond, it is imperative that one asks these 5 important questions to your prospective financial adviser.

Question 1: The insurer’s rating and claims process

Given that an insurance contract is a promissory note, it is very important to understand the financial standing and the claims process to ascertain whether the insurance company will be able to keep the promise made to pay a claim in the unfortunate event of death.

One can ascertain an insurance company’s financial standing by reviewing their ratings. These ratings are done by agencies like Standards and Poor’s or Moody’s, to name a couple. One should opt for an A rated company when purchasing an insurance policy.

Even if a company is A rated, one should enquire into the insurance company’s claims pay out process and percentage of claims paid out. Most renowned insurance companies have a simple claims pay out process and pay out majority of their claims within 5 – 10 working days of having received all required documentation.

Question 2: Financial Advisers experience and qualification

Similarly, a financial adviser’s pedagogy is very important. If the financial adviser is pursuing this role as a full-time career to start with and is armored with the requisite qualifications to provide professional advice, there is a high likelihood that you are in safe hands. In the UAE market there are many advisers but very few who pursue this as a career and are committed to providing long term quality service. In addition, many institutions like banks also act as a financial intermediary and sell insurance policies. However, many of their sales people aren’t qualified to sell Life insurance products. So, make sure that you understand your financial advisers experience and qualifications.

Question 3: The amount of Insurance required.

Life Insurance is a replacement of your income to ensure that your family continues to live in the same manner as they do today financially, in case you are not around. Hence it is important that one buys adequate amount of life cover.

The rule of the thumb is normally 7 to 10 times one’s present annual income. However, it is important to discuss your life’s present financial situation and the objective of buying the policy with your adviser. The adviser will work on these details and advise on the amount of cover required. However, you as policy buyer need to ask pertinent questions as to how this number was arrived at. Normally most advisers will base their working on the liabilities of your life, may be a mortgage payment / loan repayment, future expected major expenses, your present lifestyle to name a few important factors. Provisions made to achieve the future goals will also be factored in and a sum arrived at.

Question 4: What are the benefits in this policy and when will this be paid?

There are 2 types of policies one which is a Term Policy normally taken for a fixed term. The other is for a longer term, either an endowment or variable unit linked policy. It is important to know until what age does your policy provides cover. Does this tenure address your needs?

In addition, Term policies have no cash value and only pay out in case of death or disability as applicable. The variable unit linked policies also have cash values. Please check if this guaranteed or variable as per the market factors. Some plans do allow partial withdrawal.

If there are living benefits attached to your policy like a disability benefit or critical illness, one needs to understand the conditions under which these benefits are payable. In some critical illnesses certain terms and conditions are involved for payment of claims. One needs to ask these questions to be better informed and to avoid unpleasant surprises in the future.

Question 5: What happens If I can’t pay the premium?

Term policies have no cash values and offer a grace period to pay the premiums, if not paid by then the policy lapses. However, some variable unit linked policies do offer flexibilities, popularly called premium holiday, after a certain period of premium paying.

Life evolves and so do conditions change. It is important to know how much FLEXIBILITY these policies offer to adapt to ones changing needs.

I hope that you ask all these 5 questions to your financial adviser before you make a commitment. We at New Age Insurance Brokers in UAE, are always available to answer any additional questions you may have.

*(Please note that product features if any discussed in this article pertains to the UAE regulatory market and can vary with other markets mainly in terms of terminologies used)

5 Financial Mistakes We Make in Our 30’s

The 30’s are all about major milestones and new priorities – marriage, owning a car, having your own place, and maybe even kids! You are much older, wiser, and eager to leave the money issues of your 20’s behind you. However, there are possibilities of making mistakes that could have repercussions for the years to come down the road. Here are some financial mistakes that you can avoid in your 30’s and invest wisely instead.

1. Making debt a way of life

In your 20’s, you may have had to take on student loans, car loans and credit cards debts. But continuing to rack up debts into your 30’s, especially, that of credit cards and un-affordable mortgage can result in a downward financial spiral that is hard to recover from.

The best habit one can develop in the 30’s is to plan ahead of time and save up so that all of one’s purchases can be paid off with one’s current income and not potential income.

2. No record of daily expenses

Dubai offers both the opportunity to earn and spend. It is what you choose to spend on that matter.

Records of savings and expenditures are always a recommended practice in one’s daily life. Once a month, sit down and look at your bank accounts and credit cards to see where you have spent and how much you have spent. Keeping a close eye on expenses will not only helps you maintain discipline of keeping your outgoings less than your incoming; it will also highlight areas where you might be splurging more than you should. Perhaps, it is time to lower your restaurant bills by cooking more at home! These changes are easier to make when caught well in time before they become part of a lifestyle that is un-affordable.

3. Not saving for retirement

It is recommended that one should save at least 10% of their income for retirement. That is not easy but let that nothing holds you back from saving whatever little you can, now. Saving now matters, even though retirement is far away, because time matters. Time matters because of the magic called “compounding”. Read our blog here to learn more about the cost of delaying savings.

With so many options available for investments, Systematic Investment Plan or SIP is one great investment option where one can invest a fixed amount in a mutual fund scheme at regular intervals. SIP can lead to handsome wealth creation in the long run.

Financial Mistakes

For example

If you invest AED 1,000 a month, with the selected mutual fund scheme unit being AED 10 in the first month, you gain 100 units. The following month, if the unit price drops to AED 9, you gain 111 points and further if the unit price drops to AED 8 the gain would be 125 units. By the investment of AED 3000 over the 3 months, you are allotted 336 units. As per SIP calculator if the entire investment of AED 3000 was done in the first month itself then the units gained would have been just 300.

SIP investments can thus help grow your investments with compounded benefits.

4. Not investing in Insurance

As parents or to be parents, you always want the best for your child(ren), which is natural and healthy.

A lot of your financial and career choices are impacted by your wish to securing your children’s financial security. You know that life is complicated, unpredictable and throws challenges at us when we least expect it. So, while most of us make sure to financially protect our families while alive, we deprioritize protecting our families in case, just in case, something was to happen to us.

Life insurance is a way to protect your family financially in case of your sudden and unexpected demise. The toll of a financial loss will be the last thing affecting your family. The life insurance cover will be a means of steady financial income during hard times when your family is coping with a deep loss. Critical illness insurance and disability insurance are other options that one should consider as these can impact your income-generating ability while you are alive.

5. Don’t let your professional life stagnate

In your 30’s, it is necessary to actively invest in your professional development. The pay-scale study shows that 20’s is the time for significant income growth of about 60% but as one moves into the 30’s, one can expect to see a slowdown in salary growth to about 20% over the decade. The reason for this is- additional demands outside of work such as relationships and family obligations. This is why one needs to stay on top of industry trends. One must continue looking for career opportunities and stay prepared for challenges and growth.

Your determination to keep your financial life in order while you are in your 30’s, will lead to your building real wealth that lasts. Any questions? We are happy to help!