Three problems with cyber insurance, and how to solve them

Cyber insurance is now a cornerstone of organizational risk management, but skyrocketing premiums, complex procurement, and hidden coverage gaps pose serious hurdles. Discover how to overcome these challenges and lower your costs with stronger cybersecurity strategies.

Cyber insurance has quickly evolved from a niche coverage option to an essential element of risk management strategy across industries. However, despite its critical importance, businesses face several significant challenges regarding how to get cyber insurance. Understanding these issues, and how to address them, can greatly benefit organizations looking to effectively protect themselves against cyber threats.

What is cyber insurance?

Cyber insurance is specialized insurance coverage that helps organizations mitigate financial losses due to cyber incidents, including data breaches, ransomware attacks, phishing scams, and various types of cybercrime. Originating in the late 1990s, the concept of cyber insurance was initially developed in response to the growing digitization of business operations and an increase in cybercrime. Over time, as cyber threats have grown more sophisticated and frequent, cyber insurance has become indispensable for businesses ranging from small startups to large corporations.

The typical cyber insurance policy covers expenses associated with cyberattacks, including notification costs, crisis management, legal fees, and the direct financial impacts of downtime. Despite these protections, businesses increasingly face obstacles when securing, maintaining, and affording cyber insurance.

Three critical problems with cyber insurance

1. The rapidly rising cost of cyber insurance

One of the most pressing challenges facing organizations is the significant increase in the cost of cyber insurance premiums. As cyberattacks become more frequent and financially devastating, insurance companies are responding by substantially raising their premiums. Organizations now see premiums that have doubled or even tripled within a short span of time.

Factors driving this rise include:

• Increased cyber threat frequency: Cybercrime is on the rise globally, with sophisticated ransomware attacks and large-scale data breaches becoming commonplace
• Expanding attack surface: The growing reliance on digital infrastructure and remote work expands vulnerability points
• High costs of cyber claims: Insurers are covering larger payouts due to expensive recovery processes, ransom payments, regulatory fines, and lawsuits stemming from breaches

Businesses exploring how much cyber insurance costs often find the lack of a clear answer disheartening. Premiums vary significantly by industry, business size, types of sensitive data stored, and the robustness of existing security measures. And companies with poor cybersecurity practices or previous incidents face considerably higher costs.

2. Complex and increasingly difficult procurement processes

Securing cyber insurance is no longer as simple as filling out a form and signing a contract. The procurement process has become highly detailed and complicated, prompting many businesses to worry over what details they need to get cyber insurance.

Insurance companies now require exhaustive documentation of the many elements that minimize an organization’s cyber risk profile, including:

• Thorough cybersecurity policies and procedures
• Comprehensive incident response and disaster recovery plans
• Regular cybersecurity training for employees
• Compliance with cybersecurity standards and regulations, such as HIPAA, GDPR, and other industry- or location-specific guidelines

Insurers conduct thorough evaluations of a business’s cybersecurity posture, often involving rigorous questionnaires, audits, and vulnerability assessments. Failing to meet these criteria or being unable to clearly demonstrate compliance can result in coverage denial or significantly higher premiums.

Additionally, the standards for approval are frequently changed and updated as insurers react to emerging threats. Businesses must continually reassess and update their cybersecurity measures to remain insurable.

3. Coverage gaps, limitations, and exclusions

Even after successfully obtaining cyber insurance, organizations often find unexpected gaps in their coverage. Policies frequently contain complex exclusions or limitations, leaving businesses exposed to significant remaining risks.

Common gaps include:

• Nation-state attacks: Many policies exclude coverage for cyberattacks attributed to nation-states or acts of war, even though such attacks are increasingly common
• Specific ransomware payments: Policies might exclude or limit coverage for ransom payments, especially those linked to sanctioned entities or state-sponsored threat actors
• Regulatory fines and penalties: While policies typically cover breach notification and legal costs, coverage for fines or penalties resulting from regulatory violations is frequently limited

These exclusions create considerable uncertainty for businesses, making it difficult to determine how well their cyber insurance will protect them if an incident occurs.

How organizations can lower cyber insurance costs

The increasing difficulty and expense of securing cyber insurance underscore the need for organizations to proactively enhance their cybersecurity posture. Companies wondering how to lower the cost of cyber insurance should know that one direct way is to implement robust, comprehensive security measures that reduce their risk profile.

Strong cybersecurity practices can significantly influence an insurer's assessment of a company's risk level, potentially resulting in easier procurement and lower premiums. Key actions businesses can take include:

• Investing in advanced cybersecurity solutions, such as intrusion detection applications, behavior analytics, and multifactor authentication
• Developing comprehensive incident response plans and regularly testing them
• Conducting frequent cybersecurity training programs to educate employees about recognizing and responding to threats
• Ensuring compliance with industry standards and regulations

Adopting integrated cybersecurity solutions that function well together and with legacy systems can greatly improve an organization's cybersecurity framework. Imprivata provides both software and hardware solutions designed to mitigate cyber threats and streamline security management. Our comprehensive approach addresses vulnerabilities commonly targeted in cyberattacks, including weak user authentication processes, poor access management, and inadequate identity verification.

By addressing critical gaps in security, Imprivata solutions can reduce an organization's perceived risk to insurers, helping to make it easier and less costly to obtain cyber insurance. Click here to learn more about meeting cyber insurance requirements and reducing your risk profile.