4 Things To Do Right Now To Prevent Your Cyber Insurance Claim From Being Denied

In 2022, Illinois-based ICS faced a data breach. Despite their cyber insurance with Travelers, their failure to implement multi-factor authentication (MFA) led to a rescinded policy and denied claim. This highlights the critical need for businesses to ensure their cyber insurance claims are honored, especially as premiums rise—up 62% last year alone.

Why Claims Get Denied

Small businesses frequently encounter a range of technology challenges that can impede their operations and growth. One prevalent issue is outdated hardware and software, which can slow down processes and lead to frequent disruptions. Another common problem is insufficient cybersecurity measures, leaving businesses vulnerable to data breaches and cyberattacks.

Additionally, small businesses often struggle with integrating various software systems, resulting in inefficiencies and miscommunication. Limited IT support can further exacerbate these issues, as in-house teams may lack the expertise to address complex technical problems. These challenges hamper productivity and create stress and uncertainty for business owners. Recognizing and addressing these information technology hurdles is crucial for maintaining smooth operations and fostering growth.

“Most claims that get denied are self-inflicted wounds,” says Rusty Goodwin, an Organized Efficiency Consultant at Mid-State Group. Denials often result from businesses’ accidental misrepresentations or omissions, or failing to update insurers about security changes. Here’s how to avoid these pitfalls:

1. Find a Knowledgeable Broker

Insurance policies are complex. Key sections include the deck pages (deductible, costs, liability limits), insuring agreements (insurer’s promises), and conditions (your obligations). Work with a broker who understands these details. Avoid brokers who don’t specialize in cyber insurance.

2. Understand the Conditions

Insurers will honor claims if you fulfill the conditions of the contract. These often include using MFA, password managers, data backups, and employee cybersecurity training. Misunderstanding these conditions commonly leads to denied claims.

3. Make Good on Your Promises

Just like a homeowner who fails to install a promised security alarm and faces a denied claim, businesses that don’t enforce promised cybersecurity measures risk claim denial. Ensure you implement and maintain these measures.

4. Communicate Clearly with Your MSP

Many companies assume their Managed Service Provider (MSP) knows their insurance promises, but often, they aren’t informed. Regularly review your policy and communicate with your MSP to ensure compliance.

“We’re the architects of our own problems,” says Goodwin. By working with a knowledgeable broker and adhering to your promises, you can ensure your cyber insurance claim is paid when needed.