Cyber Insurance Gap Emerges as Policies Become Stricter and Costs Rise

Recent data indicates that obtaining cyber insurance policies is becoming more challenging, and some organizations are reporting that certain circumstances could lead to claim denials.

In today’s world, it seems every organization is either obtaining or seeking cyber insurance as part of their cybersecurity strategy. As insurers continue to gain insights from the claims stemming from their issued policies, new trends are emerging. According to Delinea’s 2023 State of Cyber Insurance report, cyber insurance is creating a gap that may make the case that tighter security controls are a better answer.

Obtaining a policy is not as simple as obtaining car insurance. According to the report:

• 28% of organizations with less than 250 employees who applied were denied coverage
• 63% of larger organizations had to use insurance-provided solutions/appliances
• 67% of organizations say it took four months or longer to obtain a policy
• 69% of organizations have experienced an increase in cyber insurance premiums of 50% to above 100%

However, once organizations obtain a policy, it’s not as easy as filing a claim and getting it covered. The report indicates that 79% of organizations had to place a claim with their cyber insurer, but many of them were denied for several reasons, including:

• Lack of security protocols in place (experienced by 43% of organizations)
• Human error (38%)
• Not following compliance procedures (33%)
• Not reporting to the insurer first (31%)

These issues create a gap between the rising costs of premiums, additional required solutions, and increased denial of claims. Essentially, it means that people are paying more for a service they may not be able to use. It’s also worth noting that despite an increasing need for additional security solutions, people-related mistakes often lead to claim denials.

To address this issue, it’s essential to educate users through new-school security awareness training. Organizations can significantly lower the risk of successful attacks by teaching employees how to interact safely with malicious content in emails and on the web. This, in turn, reduces the likelihood of needing to file an insurance claim.

Information used in this article was provided by our partners at KnowBe4.