Why Insurers Reject Cyber Claims (And How to Avoid It

Cyber insurance is becoming increasingly important, yet many UK businesses still don’t have it. In fact, 35% remain uninsured. And honestly, despite the advantages that come from having this type of financial protection, it’s easy to see why some organisations are hesitant to start paying premiums. 

The basic idea is that you pay your premiums, and, if the worst happens, your insurer will step in to help with the cost of recovery. That could include legal fees, customer notifications, business interruption, specialist recovery work and other expenses that quickly mount up after a cyber attack.

That’s how it’s supposed to work. Unfortunately, the reality is a little different. 

Many organisations are finding that, during those worst possible moments, the support they thought was there actually wasn’t. Claims are getting denied, and research from the United States shows that almost three times as many cyber insurance claims are closed without payment as with it. 

So, are insurers simply refusing to honour their policies?

Generally, no. More often than not, claims run into difficulties because businesses either misunderstand what they’re actually covered for, or can’t demonstrate they took reasonable steps to protect themselves before the incident occurred. Here are some common reasons for denial:

1. Unsuitable coverage

One common issue is having the wrong level of cover. Government research found that almost a quarter of SMEs who purchased cyber insurance weren’t fully aware of the options available when choosing their policy. That can leave businesses assuming they’re protected against certain risks, when, in reality, there are some major gaps between the likely risks and the protections in place.

2. Failure to adopt basic security measures

Insurers increasingly expect businesses to have fundamental cybersecurity controls in place before they’ll pay out, to show that they’re taking appropriate measures to reduce the risk of an attack succeeding. That includes mandatory Cyber Essentials protocols like enabling multi-factor authentication, installing security updates, and ensuring backups are properly isolated from live systems.

3. Lack of evidence

Finally, there’s the issue of evidence. Insurers are placing less reliance on declarations made during the application process and much more emphasis on being able to prove the controls were operating as intended. Without clear, detailed documentation, records or independent verification, demonstrating that can be difficult, even if you know you did everything by the book.

Give your claim the best chance of success

The best way to avoid problems if you need to make a claim is to make sure everything is in place long before you ever need your insurance. And a great starting point is Cyber Essentials certification. Certified organisations make around 92% fewer cyber insurance claims, showing just how effective good cyber hygiene and best practices can be at preventing incidents in the first place. 

At Reliable, we’re here to offer personalised advice and guidance to help you build a strong security strategy, and we can prepare your organisation for Cyber Essentials certification. So, if the worst does happen, you’ll be in the strongest possible position to minimise disruption, support your claim, and receive the financial aid you need to get your business up and running quickly.