If you assume your cyber insurance claim will be approved without any scrutiny, you might want to reconsider. Insurance claim rejections have been on the rise. During the evaluation of your claim, your cyber insurance provider will determine if you exercised “due diligence” in safeguarding your business against potential cyberattacks. Although having a cyber liability insurance policy is indispensable nowadays, you can’t be completely certain that your insurer will cover any expenses you face following a security breach.
The fine print of your cyber insurance policy document contains specific terms and conditions established by the insurer that you must adhere to. Consequently, it’s crucial for you to evaluate your compliance with your cyber insurance policy’s terms and make sure any risks that could result in non-compliance are addressed.
Let’s examine some prevalent reasons for cyber insurance claim rejections, the consequences of these denials, and how appropriate assistance can help you prevent your cyber insurance claim from being denied due to non-compliance.
What are the Top Reasons Why Claims Are Denied?
In addition to striving to reduce payouts and enhance their loss ratio (the proportion of premiums to payouts), cyber liability insurance providers examine several other factors before deciding to deny a payout or limit it. Here are six common reasons why your cyber insurer may either reject your claim entirely or a significant portion of it.
- Policy Exclusions: Policy exclusions are perhaps the primary cause of claim denials. Attempting to claim for a security incident that falls under the exclusions, often detailed in the policy document’s fine print, may prove fruitless.
- Insufficient Prevention Measures: Lacking adequate prevention measures provides insurers with a straightforward reason to reject your claim. Your insurance policy will outline the data security practices that your business network must adopt.
- Inadequate Documentation of Preventive Measures: Insurers will expect to see concrete evidence in the form of documentation regarding the preventive measures you’ve employed against cyber threats. To avoid complications, maintain thorough, accurate, and up-to-date documentation at all times.
- Third-Party Stakeholder Negligence: The security of your network is not solely your responsibility but also that of your third-party stakeholders. A security breach in a third-party vendor’s network could lead to the insurer denying your claim. Even if the claim isn’t denied, the insurer is likely to examine the issue closely, potentially resulting in a lengthy, complicated process.
- Unintentional Errors and Omissions: Accidental mistakes and omissions in the documentation submitted to the insurer can be detrimental to the approval of your claim. The documented evidence should cover everything you’ve done to comply with the insurer’s terms.
- Coverage Limitations Due to Interruption Timeframes: Cyber liability insurance policies differ, so it’s crucial to pay close attention to coverage timeframes. Understanding these limits could mean the difference between having all your losses covered and receiving coverage for only a small percentage of them.
Kyber Security | CT Cybersecurity Experts
Don’t get caught off guard. See your organization from an attacker’s perspective. Kyber Security can conduct a comprehensive cyber insurance and controls preparedness assessment to evaluate vulnerabilities.
Here’s What You Can Expect From an Assessment:
- Understand your organization’s gaps with core controls associated with cyber liability insurance premiums
- Obtain immediately actionable information for how you can better secure your organization
- Learn how you can improve the overall cybersecurity posture of your organization
