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Tata AIG plans cyberinsurance for IT industry

Priya Ganapati

Satyam sued for poor service. VSNL servers hacked into. Connectivity brownout makes Indian Web sites inaccessible for ten hours.

If the Tata AIG General Insurance Company has its way, all these headlines makers can now rest in peace. Of course after having their bima or insurance done.

Till now, insurance had been restricted to medical, life and protection against damages to assets. Despite its burgeoning size the IT industry had been left out of the purview of insurance. But with the entrance of Tata AIG, Indian IT companies can protect themselves from a range of possibilities like cyber extortion, e-business interruption, denial of service attacks to programming errors, incorrect recommendations and even inappropriate installation and training.

While the Internet has helped companies expand their reach and explore alternate business opportunities, it has also left them vulnerable to denial of service attacks and hacking. Many companies have faced ransom demands from cyber squatters who occupy domain names on the Internet that should rightfully belong to the company. Even software developers and companies are liable for legal action from customers dissatisfied with their products or services.

For instance, a consultant may recommend a software package to perform a specified task. But if the recommendation misses the mark, he may be sued for damages. Similarly a data processing firm can be sued for improper processing or reporting of data. Internet Service providers and even email providers constantly run a risk of a lawsuit for interrupted service.

Tata AIG General Insurance now offers protection with its policies targeted at almost all segments of the IT industry. Its services cover liabilities broadly in four areas: Internet, computer services, telecommunications and electronic equipment. Sample the range on offer:

* Netadvantage Internet Content liability: Designed for companies that use the Internet for any idea of media or advertising the policy provides protection against claims alleging defamation, libel, rights of privacy violation and copyright and trademark violations.

* Netadvantage Pro for securing ISPs: Protection to service providers against negligent acts, errors and omissions in the provision of Internet services, loss or interruption of service and even transmission of computer viruses.

* Computer services and software developers liability: Claims brought against the company or its employees for any errors or omissions in programming, consulting, data processing, system installation and training.

* Protech Telecommunication policy: Coverage for software, hardware, firmware, telecom system and network design and neglect or omission in the delivery of telecom services and products.

Tata AIG General Insurance is a joint venture between the Tata group and the American International Group. The combine has two separate ventures, the Tata AIG General Insurance Company Limited and Tata AIG Life Insurance Company Limited, in which Tata Sons controls 74 per cent stake. The two entities have an authorised capital of Rs 250 crore and a paid up capital of Rs 125 crore each.

A year old, in developed markets like US, UK and Japan, AIG in partnership with Tata is now introducing these products in the second phase of IT intensive countries: Israel, India and Ireland. Introduced in Israel two to three months ago, AIG will target Ireland next.

The products are aimed at everyone who has a presence on the Internet or a finger in the IT industry. From individual developers to corporates and consultants the company wants to cover them all.

"These are targeted at everyone who is doing something in IT. It could extend to an individual who has a personal Web site and will cover companies providing technology on the Web," Dalip Verma, managing director, Tata AIG General Insurance Company said. The company will settle claims up to a maximum of $ 25 million.

The Insurance Regulatory and Development Authority is expected to clear the suite of products in a few days. Sources at the company said they expected the clearance to come through with at the most a change or two in the wording of certain policies.

But cyber extortion or law suits against companies for services rendered are rare. Incidents of hacking have been largely limited to pranks played by a few over-enthusiastic youngsters. Cases of hacking with a criminal intent have not been many. So, how successful will these insurance products be in India?

Tata AIG claims to have done its homework. "We had lots of discussions with the Indian IT industry about the products. We had road shows and seminars all over India to show case our offerings. And the response has been very enthusiastic," Verma said.

But the company does not have its targeted figures worked out for India yet. "World-wide, we are targeting $ 50 million in terms of premium this year. We do not have a number for India. These products are new to the market and will take some time to catch on," Verma said.

Company sources were unclear on whether Tata AIG would combine with risk management services offered by its allied company, Tata AIG Risk Management services with the insurance policies offered. "We will be undertaking the usual risk assessment based on which the premium for the policy would be decided. And security testing of systems would be part of that assessment," a senior executive there said.

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