Success with cyber-insurance claims

Cyber-crime is no longer solely the concern of big business. It’s become one of the most significant business threats of the current era. From global conglomerates to freelance consultancies, no organisation is immune to phishing scams, ransomware attacks, or data breaches. And the threat has to be taken seriously, because a single security lapse can lead to financial loss, reputational damage, and in many cases, business closure. 

 

But while companies are increasingly turning to comprehensive cyber-insurance for protection, too many SMEs are having their claims rejected or payouts delayed, because their insurance policy terms were not met. Having cyber-insurance isn’t enough to survive; you also need to understand and comply with the conditions that make your policy valid.

 

 

The holes in the cyber-insurance safety net

Cyber-insurance undoubtedly has an important role to play for all businesses. It’s as integral as fire, theft, business disruption, and indemnity cover, and few experienced companies would choose to go without those. But it can’t do everything, and should never be seen as a substitute for proactive cyber-security measures. Because while cyber-insurance should be there to help pick up the pieces after an incident, if you don’t meet the terms of your policy, any claims will be denied, and this is something that many startups and SMEs simply don’t understand.

 

In recent years, insurers have faced a surge in cyber-security claims, and those claims are getting a lot more expensive; payouts in 2024 were more than 2.3 times the amount paid in 2023. In response to this, insurers are tightening their eligibility criteria, and in-house security is now an inescapable prerequisite. And the thing that so many SMEs are struggling with is that those insurance requirements have moved way beyond the need for multi-factor authentication (MFA) for all employees. Cyber-insurance is now dependent upon businesses complying with a range of steps to protect their systems and data.

 

 

Which factors influence cyber-insurance payouts

Cyber-security insurance claims are denied for a whole range of reasons, but there are three issues that insurers see repeatedly.

 

Underinsurance. Just like with theft or property cover, underestimating the value of your digital assets can lead to reduced or declined payouts. So, if your cyber-insurance policy doesn’t cover the full potential value that a cyber-incursion may generate, the insurer may only pay a proportion under the “average clause.” Or reject the claim entirely.

 

Missed security conditions. Cyber-insurance will almost always stipulate specific safeguards that the business must implement. These will include multi-factor authentication, firewalls, and data encryption. If you don’t meet these conditions, your policy can be invalidated. 

 

Exclusions. Don’t assume “cyber-crime” covers everything. Many policies exclude insider threats, social engineering, or third-party breaches.

 

 

How to stay compliant and protected

Before you do anything else, read your insurance policy. This is the most important step you can take with any form of insurance. Don’t just skim it – read the details and ensure that all specified safeguarding strategies are put in place. That way, if you ever need to claim, you can be confident that you’re covered.

 

But good cyber-security hygiene is about more than validating your insurance. It’s about giving your business the best protection you can, because even the biggest payout can rebuild your reputation, and there are several essential security measures that every business should put in place.

 

Multi-factor authentication. Multi-factor authentication is now a standard expectation for all businesses. Requiring secondary verification adds an extra layer of defence beyond passwords. It can take a variety of forms, including codes, tokens, or biometric scans, so it can be adapted to suit to the needs and resources of your business. Insurers now view multi-factor authentication as a measure of “reasonable” protection.

 

Regular patch cadence. Outdated software is one of the most common causes of cyber-breaches. If you can establish a consistent patching routine, you can help to close known vulnerabilities, protecting your business and ensuring that your insurance remains valid.

 

Audit trails. Maintaining audit logs is one of the best ways for businesses to detect cyber-security issues early. Your audit train can also provide vital evidence during a claim. Without records of system activity and responses, proving compliance or incident handling becomes far more difficult and can actually jeopardise payouts.

 

Train employees. Human error remains the biggest cyber-security risk. By providing regular training, phishing simulations, and policy refreshers, you can help to reduce that risk, at the same time as demonstrating your commitment to prevention to your insurers.

 

Review your policy regularly. No healthy business is static, and your cyber-security risks evolve as your business grows or adopts new technologies. Reviewing your policy annually to ensure it still reflects your operations and controls is essential if you want to avoid any future claims being rejected.

 

Cyber-security insurance is there to protect your business and support it through recovery, should the worst happen. But you have to do your bit too. Taking out a policy is the easy bit. Hopefully, with the right preventative measures in place, you’ll never need to make a claim. But if you do, then those same measures will ensure that you receive the insurance payments you deserve. 

 

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William Thackray is Operations Director of AGT Computer Services

 

Main image courtesy of iStockPhoto.com and ipopba