Businesses across all industries are increasingly turning to cyber insurance as a critical layer of protection against a growing range of cyber threats. But as cyber risks evolve, so too do insurer expectations. Claim denials are rising, especially for organizations that fail to demonstrate robust cybersecurity practices.
So, what exactly are insurers looking for when underwriting a cyber policy? And how can your business meet or exceed those expectations to both secure coverage and reduce long-term risk?
In this blog, we’ll explore the key components insurers evaluate in your cybersecurity posture, explain why cyber insurance claims are often denied, and offer actionable ways to strengthen your cyber risk management strategy.
Why Cyber Insurance is Now a Business Essential
Cyber insurance has evolved from a niche coverage to a critical business safeguard. With the average cost of a data breach surpassing $4.4 million globally, according to IBM’s 2025 Cost of a Data Breach Report, few companies can afford to weather a major cyber incident without some form of financial protection.
Cyber insurance helps offset these costs by covering expenses such as forensic investigations, data restoration, regulatory fines, legal fees, and customer notification processes. But cyber insurance doesn’t just provide monetary relief. It also pushes companies to proactively improve their cyber risk management posture, reducing the chance of incidents altogether.
Cyber Security Insurance Gaps: Are You Ready?
While cyber insurance can be a powerful safety net, it only works if your organization meets insurer expectations. To help you identify gaps in your cybersecurity program before it’s too late, use our Cyber Insurance Readiness Checklist to quickly audit your environment and flag areas that may fall short.
Common Myths About Cyber Insurance and Cybersecurity
There are still many misconceptions that lead businesses to take unnecessary risks or make poor decisions:
- “Cyber Insurance Will Cover Everything”: Cyber policies have limitations, exclusions, and strict requirements. Assuming full coverage without understanding your responsibilities is a costly mistake.
- “Small Businesses Don’t Need Cyber Insurance”: Small organizations are frequently targeted because they typically have weaker defenses. Cyber insurance is just as crucial for SMBs.
- “Having Cyber Insurance Means I Don’t Need Strong Cybersecurity”: Insurers are increasingly requiring high levels of cyber maturity before issuing or renewing policies. Weak security could mean no insurance.
- “Filing a Claim Is Simple”: Insurers require detailed documentation and evidence of compliance. Without preparation, the process can be lengthy or result in denial.
What Do Insurers Look for During Cyber Insurance Underwriting?
Successfully obtaining or renewing cyber insurance, as well as ensuring claims are paid when needed, requires more than simply answering a checklist. Insurers are no longer satisfied with basic yes or no responses. They now expect clear evidence of strong cyber risk management practices, demonstrated through a well-developed, layered cybersecurity strategy.
Here are the key areas underwriters evaluate to assess the strength of your cyber risk management:
MFA
MFA is one of the first requirements many insurers look for, especially for remote access, email platforms, administrative accounts, cloud services, and VPNs. Without MFA, insurers may either raise your premium or exclude certain types of coverage. Even with a sophisticated firewall or antivirus solution, a lack of MFA significantly increases the chances of unauthorized access via phishing or credential stuffing attacks.
Data Backup and Recovery
Regular, well-managed data backups are a cornerstone of cyber risk management, especially when it comes to ransomware resilience. Underwriters closely examine how frequently your data is backed up, where it’s stored, and how quickly it can be restored after an attack.
They look for automated backup systems that are routinely tested and aligned with clear recovery time objectives (RTO) and recovery point objectives (RPO). Backups stored offline or in immutable formats, those that cannot be altered by ransomware, are especially favored.
Insurers also assess whether your organization regularly tests its disaster recovery plans to ensure a fast and reliable response.
Endpoint Detection and Response (EDR)
Insurers want to see proactive threat detection tools like EDR or Next-Gen Antivirus (AV) in place. These platforms go beyond traditional antivirus software by identifying suspicious behavior in real time and automatically containing threats before they escalate.
All endpoints, such as laptops, desktops, and servers, should have up-to-date antivirus or antimalware protection. However, that alone is not enough. EDR tools play a vital role in incident response and can often be the deciding factor in how quickly a breach is detected, investigated, and contained.
Employee Security Awareness Training
Employee cybersecurity risks remain one of the most common vulnerabilities, which is why insurers place significant emphasis on employee preparedness. Underwriters look for ongoing security awareness training, regular phishing simulations, and well-defined policies around password hygiene and device usage.
In some cases, policies may even require documented proof that training programs are in place and up to date. The more proactive your organization is in educating its workforce, the stronger your overall risk profile appears to insurers.
Regular Vulnerability Scanning and Patch Management
Insurers expect you to actively manage vulnerabilities. That means running regular scans, applying security patches quickly, and remediating known weaknesses. Delays in patching, especially for critical vulnerabilities, can result in denial of coverage if those delays lead to an incident.
Incident Response and Business Continuity Plans
Having an up-to-date and tested incident response plan (IRP) is no longer optional. Insurers expect detailed documentation that outlines how your organization would respond to a cyber incident, including roles and responsibilities, containment strategies, communication protocols, and recovery timelines.
In many cases, underwriters also look for a broader business continuity plan, one that ensures critical operations can continue during and after a disruption. Together, these plans not only help mitigate damage but also signal a high level of cyber readiness, which is key to securing coverage.
Third-Party Vendor Risk Management
Your cybersecurity is only as strong as your weakest vendor. Insurers look at how you manage vendor risk, especially if third parties have access to your data, systems, or network. Do you vet vendors for their own security practices? Do you have contractual obligations that require them to meet certain security standards?
A single unsecured partner can expose your entire network, so insurers expect to see strong contracts, clear access controls, and a process for ongoing assessment.
Security Audits and Compliance Readiness
Demonstrating compliance with security frameworks like NIST, CIS Controls, or ISO 27001 can significantly improve your chances of favorable coverage terms. Insurers see these as indicators that your organization takes cyber risk seriously and is committed to continuous improvement.
Routine internal audits and external assessments are also highly valued, as they demonstrate operational transparency and maturity.
6 Common Reasons Cyber Insurance Claims Are Denied
As demand for cyber insurance rises, so do the hurdles that come with securing it. What was once considered a simple safety net has evolved into a rigorous evaluation process. Today, underwriters expect organizations to demonstrate that they’re proactively managing cyber risk — not just reacting to incidents after the fact.
Without a solid cybersecurity strategy in place, businesses may face higher premiums, reduced coverage, or outright denial. Even minor gaps in your cybersecurity posture or documentation can be enough to trigger a rejection. Let’s take a look at the most common reasons for cyber insurance claim denials:
1. Failure to Maintain Minimum Security Controls
Insurers expect organizations to maintain baseline security measures such as multi-factor authentication (MFA), encryption, firewalls, and antivirus software. Without these controls in place or proper documentation confirming their use, your cyber insurance claim risks being denied.
Even if strong controls were established at underwriting, failing to maintain them can result in claim rejection. For instance, neglecting software updates or letting antivirus subscriptions lapse may be considered negligence. Similarly, if ransomware infiltrates through an unprotected endpoint, insurers may argue the breach was preventable with adequate controls.
2. Misrepresentation or Omission of Risk Factors
When applying for coverage, businesses are required to disclose their current cybersecurity posture. However, many claims are denied because organizations provide information that is incomplete, inaccurate, or misleading during the application process.
Whether intentional or due to a lack of awareness, failing to disclose accurate information about your systems, policies, or controls can nullify your policy when you need it most. A common example is failing to report a known vulnerability or prior breach incident.
3. Policy Exclusions and Coverage Gaps
Cyber insurance policies often include detailed exclusions that can significantly limit coverage, especially for incidents involving insider threats, acts of war, or specific types of fraud. Some policies also narrowly define covered attacks, excluding events tied to nation-state actors or social engineering scams.
Without carefully reviewing the fine print, businesses may assume they’re protected when, in reality, key threats are excluded.
4. Non-Compliance With Regulatory Requirements
Failing to comply with industry-specific regulations like HIPAA, PCI-DSS, or GDPR can invalidate your cyber insurance claims. Insurers may argue that the business’s negligence in following mandatory compliance standards contributed to the breach.
5. Delayed Incident Reporting
Most cyber insurance policies impose strict deadlines for reporting incidents. If a breach or cyber event is discovered but not reported within the specified timeframe, even if the delay is just a day or two, the insurer may use that as grounds to deny the claim.
In many cases, delays aren’t intentional; organizations may still be assessing the scope of the breach or managing internal response efforts. However, even unintentional reporting delays can jeopardize coverage.
6. Inadequate Documentation
Insurers require clear, verifiable evidence to assess the validity of a claim, and without it, reimbursement becomes unlikely. This includes system logs, incident response reports, audit trails, and forensic findings. These records help insurers determine the cause, timeline, and extent of the breach, as well as the effectiveness of the organization’s response.
When this documentation is missing, incomplete, or disorganized, insurers may conclude that the claim cannot be substantiated. Even if the cyber event was legitimate, the inability to prove key details can lead to denial.
Already Have Cyber Insurance? Now Strengthen Your Security.
Proven IT, in partnership with The Bulow Group, helps businesses go beyond simply having a cyber insurance policy. We work with you to close the often-overlooked gaps between insurance requirements and actual cybersecurity readiness, ensuring that when a cyber incident occurs, you’re not just insured, you’re truly protected.
How a Strong Cyber Risk Management Strategy Benefits Insurance Outcomes
Cyber risk management is the proactive identification, assessment, and mitigation of threats to your digital assets. When well-executed, it reduces your actual exposure to threats and improves your standing with insurers. Implementing these practices helps:
- Lower Your Premiums: Insurers reward companies that demonstrate strong controls with reduced rates.
- Expand Coverage Eligibility: A mature cybersecurity program increases the likelihood of getting approved for higher coverage limits.
- Speed Up Claims Process: With clearly documented practices, insurers can verify your compliance quickly.
- Avoid Denials: Meeting or exceeding your policy’s security expectations decreases the chance of a denied claim.
How Proven IT and The Bulow Group Help You Navigate Cyber Insurance and Security
Navigating the complex landscape of cyber insurance and cyber risk management isn’t something most businesses can do alone. That’s where Proven IT, in partnership with The Bulow Group, steps in. As trusted local partners, we work side by side with your organization to strengthen your cybersecurity posture and position you for better insurance outcomes.
Here’s how we help:
- Cybersecurity Assessments: We evaluate your current environment against industry benchmarks and insurer requirements.
- Policy Readiness: We help you gather documentation, implement missing controls, and align your infrastructure with insurer expectations before you apply or renew.
- Security Solutions: From EDR and MFA to email security and backup, we deploy and manage the tools that insurers expect to see in place.
- Cyber Risk Management Frameworks: We help you build a scalable, repeatable process for managing risk, monitoring performance, and adjusting controls.
- Insurance Advocacy: Working with The Bulow Group, we ensure that your cyber policy matches your actual risk profile, and we advocate on your behalf in the event of a claim.
Secure Your Cyber Insurance with Proven IT and The Bulow Group!
Cyber threats are a matter of “when,” not “if.” Your ability to secure cyber insurance and have claims honored when needed hinges on a clear, strong, and verifiable cybersecurity posture. Proven IT and The Bulow Group are here to guide you through every step, from readiness assessments to closing security gaps and aligning with insurer standards.
Contact us today and schedule a cybersecurity consultation and take the first step toward confident coverage!
