Cyber Insurance: The Things Companies are Looking for and the Reasons Why Claims Get Rejected

Insurance cybersecurity is now more accessible to get compared to 10 – fifteen years ago, but an excellent security practice is always a must. Here is what most insurance organizations are looking for, why claims are being rejected and what they consider a no-no or a red flag. If you have not previously considered cybersecurity, you might want to start thinking about it.

Insurance agency cyber-insurance policies promise to help companies alleviate losses from past data breaches, network damage, business interruption and other cybersecurity-related incidents. These policies have been available in the market for several years, but like any other policies, they change as time goes by, particularly the risks that they cover.

Since the cyber-insurance industry is driven by the increasing market growth in recent years, it has matured tremendously. It allows insurers or clients to assess the risk they are taking and find ways to offer coverage, even for clients with not-so-good security records, according to most experts.

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Cyber insurance can be a cost-productive way to protect agencies from any catastrophic cyber-related events. A lot of experts encourage future clients to take time to do some research about it and take a good look at cyber insurance if they have not done it in the past. It has been a good market for a lot of service providers.

The cyber-insurance industry has experienced massive growth in the past five years. Between 2014 and 2016, the value of premiums surged 35%, according to reports by A.M. Best and Fitch Ratings. And according to PwC, predicted annual premiums would continue to grow from $5 billion in 2018 to $7.5 billion by the year 2020.

It is considered as one of the most successful branches of the industry over the past 15 years. It has gotten more comfortable with knowing and understanding all the risk companies will face and provide them with the right and practical solutions.

Cyber insurance that is available in the market today

Insurance companies or agencies are interested in providing  services to businesses of all shapes and sizes. The process of accepting has become more accessible for the past few years. A lot of companies find the process of securing their cyber insurance to be a lot quicker and more comfortable than they anticipated. It does not mean that agencies write premiums like they are writing their names.

Responsible companies conduct risk audits as part of their process in accepting policies for their new clients, but these processes are less involved than what you might think. In short, if a potential new client wants to purchase cyber insurance, the majority of the insurers will look for ways to provide an excellent service and meet the client expectations.

If the company or organization has a high risk of a cataclysmic breach, their coverage might cost a lot more than the package a startup company is getting. For example, company A is selling fireworks, this vendor who which provides fire insurance, will offer them a higher premium compared to their next-door neighbor, company B, who is selling purified drinking water.

The reason why claims are being rejected

No matter what kind of product your company is offering, agencies want to minimize their customer’s risk. Not only that, they expect their clients to behave the right way. If you do not lock your home before going out, the provider for your house may get suspicious with you when you put a claim in case of a break-in.

Similarly, agencies may reject the covered client’s request because of their poor security implementations. Insurers can deny their application because of the company’s failure to maintain a good cybersecurity system or because they failed to configure their security correctly, according to cyber-insurance experts. Some policies do not cover social engineered attacks.

Attacks in which an employee of the company provides data to the attacker and some companies do not cover cyber attack or ransomware payments or damages from ransomware attacks. While these branch pay out a much higher percentage of claims compared to other types of policies, insurers are more interested in your company maintained their security measures and update them regularly.

Clients should make sure that they understand their premium coverage as well as its exclusions. They should need to be careful when filling out the application. Make sure that they are accurate and they follow the minimal security requirements like user management and regular patching. Agencies also resist paying for fraudulent, criminal and dishonest acts by their clients.

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What these agencies are looking for?

As part of their process of accepting a policy, agencies usually conduct a necessary audit of their potential client’s cybersecurity practices. Companies can prepare for purchasing a cyber-insurance policy by running their own reviews before the agency does. Expert says that a proper risk assessment for any cyber insurance should consider whether their potential clients:

Has deployed good perimeter firewalls as well as anti-virus software.

The company is using complex and secure passwords.

They install software patches regularly.

The company has a user management process up and running.

They are using end-of-life software and hardware.

They have physical security controls installed.

The company encrypts all the mobile devices that interact with regulated or sensitive data.

In addition to the list mentioned above, companies need to have a properly written cybersecurity policy, provide the necessary security training to their employees and regularly review as well as respond to any security monitoring alerts.

All these precautions are fundamental steps and companies in today’s world that are not following these practices will have a bigger problem to face other than getting denied by their provider. Continuous monitoring of the company’s network traffic is one of the absolute requirement in this industry. Security teams should know how to detect threats and respond accordingly to any possible breaches before any severe damage is done to their system.

A lesson for company leaders

The cyber-insurance industry is maturing at a dramatic pace, and the majority of agencies are finding ways to assess any potential risk of their future clients accurately. In most cases, these agencies will find a way to offer the right coverage to their customers. But still, clients need to deploy stronger and reliable cybersecurity plans and do internal cybersecurity audits. In doing so, It will not only give them the safety their system needed, but also gives them the best chance to get a great deal and avoid having their claims rejected.