How One Missed Patch Cost ₹30 Crores—and What You Can Learn from It

In today’s digital landscape, cyber insurance is no longer a luxury—it’s a necessity. But buying a policy isn’t as simple as signing on the dotted line. Just like physical properties undergo safety inspections before fire insurance is issued, businesses must now go through cyber risk inspections before insurers decide to cover them.
This process is changing the face of digital underwriting—and for good reason. A single missed vulnerability can cost a company crore’s not just in ransom but in legal liability, lost clients, and reputational damage. Here's what you need to know.

What Is a Cyber Risk Inspection?

A cyber risk inspection is a structured evaluation of a company’s digital security posture. It helps insurers understand how exposed you are to cyber threats and whether you’re taking reasonable steps to manage that risk.
For businesses, it’s not just a checklist—it’s a mirror. It reveals exactly where your defenses are weak, and whether you're prepared for a breach.

How Cyber Inspections Are Done

Cyber inspections are typically remote and involve these key steps:

· 1. Initial Profiling:
Insurer collects business details: industry, size, digital infrastructure, past breaches, and regulatory exposure (GDPR, DPDP, PCI-DSS, etc.).

· 2. Cybersecurity Questionnaire:
Your IT or compliance team responds to detailed questions on firewalls, antivirus, VPNs, password policies and MFA, backup and recovery protocols, staff training, and incident response plans.

· 3. External Vulnerability Scan:
Automated tools check your public-facing systems—websites, APIs, email servers—for open ports, outdated software, and other security gaps.

· 4. Internal Security Assessment (For Larger Clients):
A more in-depth look at internal systems, patching cycles, admin access logs, and endpoint protection tools. This may be done on-site or via secure remote access.

· 5. Risk Scoring & Reporting:
A comprehensive report rates your risk, highlights vulnerabilities, and gives recommendations. Based on this, the insurer may approve or deny coverage, set premiums and limits, or require fixes.

Real Case: How a Missed Patch Cost a Law Firm ₹30 Crores

A global law firm with offices in Mumbai, Dubai, and London applied for a ₹100 crore cyber insurance policy. During the pre-policy cyber risk inspection, the insurer flagged a critical vulnerability—an outdated email server with known exploits.

The firm acknowledged the issue but delayed patching it due to internal IT restructuring.

Two months later, a ransomware attack exploited that exact vulnerability.

The attackers:
- Encrypted sensitive files and demanded a ₹5 crore ransom
- Stole client litigation data, triggering legal action by two corporate clients
- Caused operations to shut down for nearly 12 days, costing the firm over ₹25 crore in lost revenue

When the firm filed a claim, the insurer denied it, citing breach of the “reasonable precautions” clause and failure to act on the inspection findings.

Could the Firm Win a Dispute?

Surprisingly, yes—this kind of denial can be legally challenged. Here’s how:

· 1. No Clear Deadline? No Binding Obligation:
If the inspection report didn’t specify a deadline to fix the vulnerability, the firm can argue it wasn’t contractually required to act immediately.

· 2. Prove It Was the Same Flaw:
If the insurer can’t directly prove that the flagged issue caused the breach, the denial may not hold up. Many cyber policies require causation.

· 3. Vague Policy Language:
Terms like “reasonable care” or “take all precautions” are often legally ambiguous, and courts tend to rule in favor of the insured.

· 4. Acceptance of Known Risk:
If the insurer still issued the policy after flagging the flaw (without exclusions), they may have implicitly accepted the risk.

Strategic Takeaway for Businesses and Brokers

· Don’t ignore inspection findings. They’re not just suggestions—they can directly impact your claim rights.

· Document remediation steps. Even partial action shows good faith and can help during disputes.

· Push for clarity in your cyber insurance policy. Insist on clear timelines, definitions, and causation terms.

· Brokers: Educate clients that cyber policies are not automatic pay-outs—they come with responsibilities.

Looking Ahead: Live Risk Monitoring

Some insurers now use AI tools to offer continuous cyber inspections, with premiums adjusting based on real-time security behavior. This is the future—especially for industries like finance, healthcare, and e-commerce.

Final Word

A cyber risk inspection is more than a pre-policy formality—it’s your digital fire drill. Ignore it, and the cost could be catastrophic. Use it well, and it could save your business.