Introduction: The Cyber Insurance Dilemma
Cyber insurance was once seen as a safety net for businesses, offering financial protection against data breaches, ransomware attacks, and operational disruptions. But as cyber threats evolve and claims increase, businesses are facing a growing insurance gap—with higher premiums, reduced coverage, and stricter policy exclusions.
📌 Cyber insurance premiums increased by 50-100% in 2023 alone.
📌 Many policies now exclude ransomware payments and nation-state attacks.
📌 SMEs struggle to secure affordable coverage due to perceived high risk.
🔹 The challenge? Businesses need cyber insurance more than ever, but insurers are limiting coverage, increasing costs, or outright rejecting applicants.
🔹 The solution? Organisations must bridge this insurance gap by strengthening their cybersecurity posture and adopting alternative risk management strategies.
This article explores:
✔ Why the cyber insurance gap is growing
✔ What businesses can do to improve insurability and reduce costs
✔ How organisations can mitigate risks when insurance isn’t enough
1️⃣ Why is the Cyber Insurance Gap Growing?
🔹 1. Rising Cyber Risk & Payouts
📌 The problem: Cyberattacks are becoming more frequent, sophisticated, and costly, leading to higher claims and financial losses for insurers.
📌 Impact: Insurers raise premiums, introduce stricter policies, or reduce coverage to compensate.
💡 Example: The average ransomware payment rose to £1.2M in 2023, forcing insurers to limit ransomware-related claims.
✔ What businesses can do: Invest in stronger cyber defences to reduce risk and lower insurance costs.
🔹 2. Stricter Policy Exclusions & Claim Denials
📌 The problem: Many businesses discover too late that their policy doesn’t cover:
✔ Ransomware payments
✔ Nation-state attacks
✔ Regulatory fines (e.g., GDPR penalties)
📌 Impact: Businesses pay for cyber insurance but still face massive financial exposure.
💡 Example: NotPetya (2017) was classified as a nation-state attack, causing insurers to deny claims worth billions.
✔ What businesses can do: Negotiate coverage terms carefully and understand policy exclusions.
🔹 3. SMEs & High-Risk Industries Struggle to Get Coverage
📌 The problem: SMEs and high-risk industries (e.g., finance, healthcare, critical infrastructure) face higher premiums or outright rejection.
📌 Impact: Without cyber insurance, these businesses remain financially vulnerable to attacks.
💡 Example: A UK-based SME was denied cyber insurance due to a lack of multi-factor authentication (MFA) across their systems.
✔ What businesses can do: Strengthen basic cybersecurity controls (MFA, encryption, endpoint protection) to improve insurability.
2️⃣ How Businesses Can Bridge the Cyber Insurance Gap
Since relying solely on insurance is no longer enough, businesses must take proactive steps to strengthen security, negotiate better policies, and explore alternative risk mitigation strategies.
✅ 1. Improve Cybersecurity to Reduce Insurance Costs
Insurers reward low-risk businesses with lower premiums and better coverage. Strengthen security by:
✔ Implementing MFA (Multi-Factor Authentication) across all accounts.
✔ Using Endpoint Detection & Response (EDR) to block malware & ransomware.
✔ Encrypting sensitive data and maintaining secure offsite backups.
✔ Regularly patching systems to prevent known vulnerabilities.
📌 How it helps: Businesses with strong security controls get lower premiums and fewer exclusions.
✅ 2. Conduct Pre-Insurance Cyber Risk Assessments
Before applying for cyber insurance:
🔹 Assess security posture using cyber risk rating tools (e.g., BitSight, SecurityScorecard).
🔹 Fix high-risk issues (e.g., open RDP ports, weak passwords, unpatched software).
🔹 Implement a vendor risk management program to reduce third-party attack exposure.
📌 How it helps: Insurers prefer businesses that demonstrate proactive risk management.
✅ 3. Negotiate Insurance Policies & Understand Exclusions
When purchasing cyber insurance:
🔹 Request a clear list of policy exclusions—especially for ransomware and supply chain attacks.
🔹 Negotiate coverage for regulatory fines (e.g., GDPR penalties).
🔹 Ensure cloud-related security failures and third-party vendor breaches are covered.
📌 How it helps: Customising coverage prevents costly surprises when filing claims.
✅ 4. Invest in Alternative Risk Mitigation Strategies
If cyber insurance doesn’t fully cover losses, businesses must build self-reliant risk management practices:
🔹 Create a dedicated cyber risk reserve fund to cover uninsured losses.
🔹 Adopt incident response & disaster recovery planning to reduce downtime.
🔹 Use Cyber Risk Quantification (CRQ) models to assess financial exposure and plan mitigation strategies.
📌 How it helps: Reduces reliance on insurers and ensures business resilience even without full coverage.
3️⃣ Final Thoughts: Cyber Insurance is Only Part of the Solution
💡 The cyber insurance gap is growing—but businesses can take control by strengthening security, improving insurability, and adopting alternative risk strategies.
To bridge the gap:
✔ Strengthen cybersecurity controls to reduce risk and premiums.
✔ Negotiate policies to avoid coverage exclusions.
✔ Adopt alternative risk management (e.g., cyber reserves, incident response planning).
✔ Continuously assess third-party risks and supply chain vulnerabilities.
🚨 Relying solely on cyber insurance is no longer enough. Businesses that take a proactive, multi-layered approach will be best positioned to handle cyber threats.
📢 What’s Next?
💡 Next in the series: “How Insurers Can Leverage Cyber Risk Data for Better Underwriting”
Would you like a Cyber Insurance Readiness Checklist for your business? Get in touch today. 🚀
