An Executive Summary

As cyberattacks grow in frequency and severity, organizations increasingly turn to cyber insurance for protection. However, a significant risk has emerged: insurance companies are frequently denying cybersecurity liability claims, often leaving businesses financially exposed after an incident. To qualify for coverage and avoid denied claims, organizations must implement a comprehensive suite of cybersecurity tools and controls, as insurers are more stringent than ever about policy requirements.

The Hidden Dangers—How Insurers Avoid Cybersecurity Liability Claims

• High Denial Rates: Over 40% of cyber insurance claims were denied in 2024, primarily due to policy exclusions, unmet security requirements, and technicalities.

• Common Tactics for Denial: Insurers deny claims by citing vague policy exclusions, failure to maintain required cybersecurity standards, late incident reporting, misrepresentations on applications, and pre-existing conditions.

• Real-World Impact: Organizations denied coverage face not only the direct costs of breaches and ransomware but also regulatory fines and reputational damage—costs they believed were insured.

Recommendations for Organizations

• Scrutinize Policy Language: Review all exclusions and requirements with legal or insurance experts before signing.

• Maintain and Document Security Controls: Ensure all required cybersecurity measures are implemented and regularly updated.

• Be Accurate and Transparent: Provide truthful, up-to-date information on insurance applications.

• Report Incidents Promptly: Establish protocols to notify insurers within policy deadlines.

• Review Policies Regularly: Update and reassess coverage after organizational or IT changes.

If a Claim Is Denied

• Seek legal counsel specializing in cyber insurance to challenge potential unfair denials.

• Maintain thorough documentation of compliance and communications with your insurer.

 Conclusion

Cyber insurance is not a guaranteed safety net. To avoid the double jeopardy of a cyberattack and an unpaid claim, organizations must proactively manage their policies, maintain strict cybersecurity standards—including all tools and controls listed below—and be prepared to advocate for their coverage when needed.

  Essential Cybersecurity Tools and Controls

To both secure your organization and satisfy insurance requirements, the following tools and practices are critical:

• Multi-Factor Authentication (MFA): Enforce MFA for all remote access, administrative accounts, and critical systems.

• Endpoint Detection and Response (EDR) / Managed Detection and Response (MDR): Deploy EDR/MDR solutions to detect and remediate threats in real time.

• Privileged Access Management (PAM): Control and monitor privileged accounts, enforcing least-privilege and automating password rotation.

• Air-Gapped and Encrypted Backups: Maintain regular, encrypted, and offline backups; test restoration processes.

• Security Awareness Training: Conduct frequent security and phishing simulation training for all employees.

• Incident Response Plan: Develop, document, and regularly test a cyber incident response plan.

• Vulnerability and Patch Management: Use automated tools to identify and remediate vulnerabilities; keep systems up to date.

• Firewalls and Network Segmentation: Control network traffic and isolate sensitive systems.

• Password Managers: Require password managers to enforce strong, unique passwords and support least-privilege access.

• Logging and Monitoring (SIEM): Enable logging and use SIEM solutions for centralized monitoring and compliance reporting.

• Identity and Access Management (IAM): Implement strong IAM systems to control user access.

• Regular Security Risk Assessments: Conduct and document periodic risk assessments to identify and address security gaps.