As cyber threats continue to evolve in sophistication and frequency, businesses are increasingly turning to cyber insurance to mitigate financial risk. However, obtaining and maintaining adequate coverage has become more challenging than ever. Insurance providers, facing mounting losses from cyber incidents, have significantly tightened their requirements, increased premiums, and become more stringent in their claims evaluation.
“It’s often quoted that something like half of cyber liability insurance claims don’t pay out because they find that you had multi-factor authentication, but three, four, five people didn’t have it enabled,” notes Will Palmer, VP of Growth at Wolf Consulting. “You weren’t actually making sure that you enabled all these tools or whatever, it just wasn’t well administered. And administrative issues caused a lot of these claims not to pay out.”
This reality creates a critical challenge for businesses: implementing and documenting the security controls required by cyber insurance policies has become as important as having the coverage itself. In this guide, we’ll walk through the essential information you need to navigate cyber insurance for your business:
First, we’ll examine why cyber insurance premiums are rising and requirements are tightening. Next, we’ll detail the specific security controls that most policies now require. Then, we’ll highlight the common compliance gaps that frequently lead to denied claims. Finally, we’ll provide practical guidance on how to properly document your security posture to satisfy insurer requirements during both the application process and claim situations.
By understanding these key elements, you can better position your organization to obtain appropriate coverage and ensure your claims will be honored when you need them most.
Understanding Today’s Cyber Insurance Market: Rising Premiums and Stricter Requirements
The Shifting State of Cyber Insurance
Cyber insurance has transformed from an optional consideration to a business necessity, particularly for organizations handling sensitive data or relying heavily on digital operations. However, obtaining and maintaining coverage has become increasingly challenging in recent years.
“Cyber insurance policies are getting stricter,” notes Will Palmer, VP of Growth at Wolf Consulting. “It’s often quoted that something like half of cyber liability insurance claims don’t pay out because they find that you had multi-factor authentication, but three, four, five people didn’t have it enabled. You weren’t actually making sure that you enabled all these tools or whatever, it just wasn’t well administered. And administrative issues caused a lot of these claims not to pay out.”
According to Marsh’s Global Insurance Market Index, cyber insurance premiums have increased by an average of 28% year-over-year, while many policies now feature lower coverage limits and higher deductibles. This trend reflects insurers’ responses to the dramatic rise in both frequency and severity of cyber attacks targeting businesses of all sizes.
The Coalition Cyber Insurance Market Report reveals that ransomware claims have increased by 89% since 2019, with the average ransom demand rising to $1.5 million. For small and mid-sized businesses, this changing risk landscape has created a perfect storm: increasing need for coverage, decreasing availability, and more stringent requirements to qualify.
Why Insurers Are Tightening Requirements
Cyber insurance providers have fundamentally reassessed their underwriting criteria in response to mounting losses. “Sometimes we have folks come to us and say, ‘we’re renewing our cybersecurity insurance policy, and they’re saying we want you to look over what’s on this list and tell us if there’s things that we’re not doing that we need to do,'” explains Matthew Young, Project Consultant at Wolf Consulting.
Several factors are driving these stricter requirements:
First, attack sophistication continues to evolve rapidly. Traditional security measures that were once considered adequate no longer provide sufficient protection against modern threats. Attackers now specifically target backup systems, exploit zero-day vulnerabilities, and use advanced social engineering techniques that bypass conventional defenses.
Second, attack frequency has skyrocketed. SonicWall’s 2023 Cyber Threat Report recorded 5.5 billion malware attacks and 493.7 million ransomware attacks worldwide in just one year. This increasing volume of attacks means more claims and greater losses for insurers.
Third, insurers have gained more data about what actually works in preventing successful attacks. As a result, they’ve become more specific about required security controls, focusing on measures proven to reduce risk rather than accepting general security assurances.
What This Means for Your Business
For businesses seeking cyber insurance or facing renewal, the implications are clear: meeting minimum security requirements is no longer optional. Without implementing and documenting specific security controls, you may find coverage unavailable or prohibitively expensive.
“I would say definitely trends to look out for is security is a big thing,” notes Kevin Gorny, Technical Services Manager at Wolf Consulting. “The bad actors are getting very good at hiding what they’re doing and tricking people into giving up their credentials. Things. There’s breaches happening all the time with everybody’s stuff being sold in the dark web.”
Coverage costs now more directly reflect your security posture. Organizations with robust security controls, documented procedures, and proven implementation can access lower premiums and better coverage terms. Those without may face limited options or even be deemed uninsurable.
Insurance applications have also become more technical and detailed. Where previous applications might have included general questions about security practices, today’s applications require specific information about security controls, configurations, and management practices. Many now include technical verification requirements rather than simply accepting self-reported information.
Despite these challenges, cyber insurance remains an essential component of comprehensive risk management. The financial impact of a cyber incident can be catastrophic, with IBM’s Cost of a Data Breach Report placing the average cost at $4.45 million. Insurance provides a crucial financial safety net, particularly for small and mid-sized businesses that may lack the resources to absorb these costs directly.
As Will Palmer observes, “We believe that doing the right thing by each other and our customers is how you pertain long-term business relationships. So not trying to sell things that aren’t needed or services that aren’t needed and advise things to be done the way that we do them ourselves.”
Your Security Controls Checklist Required for most Cyber Insurance Policies
Baseline Security Requirements
Cyber insurance requirements have become increasingly standardized as insurers identify the most effective measures for preventing successful attacks. While specific requirements vary by provider and policy, several core security controls have emerged as universal prerequisites.
“Insurance companies are much more engaged now in asking about your defenses than they used to be,” explains David Kearns, Business Development Manager at Wolf Consulting. “They want to know about employee training, multi-factor authentication, endpoint protection, and backup strategies.”
The most consistently required security controls across cyber insurance policies include:
Multi-Factor Authentication (MFA)
MFA has become the single most critical requirement for cyber insurance eligibility. “Everyone needs multi-factor authentication in some way, shape, or form,” emphasizes Kevin Gorny, Technical Services Manager. “It’s necessary these days.”
Insurance providers typically require MFA implementation for:
– Remote access to networks (VPN, RDP, etc.)
– Access to email accounts, especially via webmail
– All privileged or administrative accounts
– Access to critical systems and sensitive data repositories
– Cloud service access (Microsoft 365, Google Workspace, etc.)
The Cybersecurity and Infrastructure Security Agency (CISA) reports that implementing MFA can prevent up to 99.9% of account compromise attacks. Given this effectiveness, insurers often deny claims outright if MFA was not properly implemented across required systems at the time of an incident.
Endpoint Protection
Modern endpoint protection platforms (EPP) that incorporate next-generation antivirus capabilities, behavior monitoring, and endpoint detection and response (EDR) features are typically required. Traditional signature-based antivirus alone is no longer considered sufficient protection.
“The issue we’ve seen with cyber insurance is that if you don’t have one component to your security setup that’s required, they often won’t pay the claim,” notes Will Palmer, VP of Growth. “It creates this all-or-nothing situation where any gap in implementation can invalidate coverage.”
Most policies now specify that endpoint protection solutions must:
– Be centrally managed with visibility across the entire environment
– Include automated update mechanisms
– Incorporate EDR capabilities for threat hunting and incident response
– Maintain logs for a specified retention period
Email Security Controls
Since email remains the primary attack vector for many threats, particularly phishing and business email compromise, insurers require comprehensive email security measures including:
– Advanced spam filtering
– Email authentication protocols (SPF, DKIM, DMARC)
– Anti-spoofing and anti-phishing protection
– Sandboxing or similar technology for attachment scanning
– Data loss prevention controls
“The stats on how many attacks originate through email are staggering,” explains Matthew Young, Project Consultant. “Having proper email security isn’t just about compliance—it’s about addressing the most likely point of compromise for most organizations.”
Regular Patching and Vulnerability Management
Timely patching of operating systems, applications, and network devices is a fundamental requirement for cyber insurance. Most policies require:
– A formal vulnerability management program
– Regular scanning for vulnerabilities
– Patching critical vulnerabilities within specified timeframes (typically 14-30 days)
– Documentation of patch management processes and exceptions
The Ponemon Institute found that 60% of breaches involved unpatched vulnerabilities for which patches were available but not applied. This statistic underscores why insurers place such emphasis on timely patching.
Backup and Recovery
With ransomware attacks targeting backup systems, insurers have strengthened requirements for data protection. Current policies typically require:
– The 3-2-1 backup rule (3 copies of data on 2 different media with 1 copy stored offsite)
– Immutable or air-gapped backups that cannot be modified by ransomware
– Regular testing of backup restoration capabilities
– Encryption of backup data
– Defined and tested disaster recovery procedures
“Keeping regular backups and testing them for recoverability isn’t just good practice—it’s essential,” says Michael Wolf, President of Wolf Consulting. “Without demonstrable backup protection, most cyber insurance policies won’t cover ransomware losses.”
Security Awareness Training
Human error remains a significant factor in successful cyberattacks. Most policies now require:
– Regular security awareness training for all employees
– Simulated phishing exercises
– Training on specific threats like social engineering and business email compromise
– Documentation of training completion and assessment results
Incident Response Planning
Organizations must demonstrate their ability to respond effectively to security incidents. Requirements typically include:
– A documented incident response plan
– Defined roles and responsibilities
– Regular testing through tabletop exercises or simulations
– Integration with business continuity plans
– Specified procedures for notifying the insurer of potential incidents
Network Segmentation and Access Controls
Proper network architecture that limits lateral movement is increasingly required. This includes:
– Segmentation between critical systems and general networks
– Role-based access controls following least privilege principles
– Regular access rights reviews
– Privileged access management
– Network monitoring and traffic analysis
As Kevin Gorny notes, “Having good backups, training your staff, implementing MFA, and having security at multiple layers should be standard practice, not just something you do for insurance purposes.”
Understanding these requirements is the first step toward securing coverage. The next critical phase is implementing them properly and creating the documentation that insurers require during both the application process and in the event of a claim.
Common Compliance Gaps That Lead to Denied Claims
The Reality of Claim Denials
When organizations need their cyber insurance most—in the aftermath of an attack—they may discover that certain compliance gaps invalidate their coverage. Insurance companies are increasingly scrutinizing claims against policy requirements, leading to a rise in claim denials.
“The fine print matters more than ever,” emphasizes Will Palmer, VP of Growth at Wolf Consulting. “We’ve seen cases where companies thought they were protected, but their claims were denied because they hadn’t fully implemented or documented a required security control.”
Understanding these common compliance gaps can help organizations avoid costly claim denials:
Misrepresentation on Insurance Applications
Insurance applications typically include detailed questions about security controls. Inaccurate responses—whether intentional or due to misunderstanding—can void coverage.
Common misrepresentations include:
– Overstating the scope of MFA implementation
– Claiming complete patch management when exceptions exist
– Indicating full endpoint protection deployment despite gaps
– Asserting that backup systems meet all requirements when they don’t
According to Coalition’s 2023 Cyber Claims Report, material misrepresentations on applications account for approximately 15% of claim denials.
Inconsistent MFA Implementation
Multi-factor authentication remains the most frequent source of compliance gaps. While many organizations implement MFA for email access, they often fail to extend it to all required systems.
“MFA needs to be everywhere now, not just your email,” notes Kevin Gorny, Technical Services Manager. “Remote access, admin accounts, cloud services—they all need that extra layer of protection.”
Common MFA implementation gaps include:
– Failing to enable MFA for remote access tools like RDP
– Allowing exceptions for executive or “special” accounts
– Not implementing MFA for third-party or cloud applications
– Using inadequate second factors (SMS instead of app-based tokens)
– Inconsistent enforcement of MFA policies
Inadequate Backup Practices
Many organizations discover too late that their backup systems don’t meet insurer requirements, particularly for ransomware protection.
“It’s not enough just to have backups anymore,” explains Cliff, Project Manager. “They need to be tested, air-gapped or immutable, and properly secured against the very attacks you’re insuring against.”
Common backup compliance gaps include:
– Lack of offline or immutable backup copies
– Failure to encrypt backup data
– Insufficient backup testing and verification
– Inadequate retention periods
– Incomplete backup coverage of critical systems
When ransomware strikes, insurance providers typically investigate whether proper backup systems could have mitigated the need for ransom payment. If backup practices were deficient, claims for ransom payments may be denied.
Delayed Security Patching
Exploited vulnerabilities that had available patches represent another major source of claim denials.
“Insurance companies expect you to patch known vulnerabilities within a reasonable timeframe,” says Matthew Young, Project Consultant. “If you’re compromised through a vulnerability that had a patch available for months, expect serious questions about your claim.”
Typical patching compliance issues include:
– Missing critical security updates
– Failure to document exceptions to patching policies
– Inadequate vulnerability scanning practices
– No formal process for tracking and prioritizing patches
– Running end-of-life or unsupported software
The Verizon Data Breach Investigations Report consistently shows that a significant percentage of breaches exploit known vulnerabilities with available patches—a fact insurers are well aware of when reviewing claims.
Insufficient Security Monitoring
Many policies require not just preventative controls but also detection capabilities. Organizations frequently underinvest in monitoring, leading to compliance gaps.
“Companies often focus on preventative measures but neglect detection and response,” notes David Kearns, Business Development Manager. “Insurers want to see that you could have detected an attack in progress, even if prevention failed.”
Common monitoring compliance gaps include:
– Lack of 24/7 security monitoring
– Insufficient logging of security events
– No formal incident response processes
– Failure to perform log reviews
– Missing alerts for suspicious activities
Incomplete Employee Training
When breaches occur through social engineering or phishing, insurers examine whether appropriate training was provided to employees.
“If an employee falls for a phishing attack, the first thing the insurer will ask is: Did they receive training? When was the last training session? Was there testing?” explains Will Palmer. “Without documentation of regular training, claims can be denied.”
Training compliance gaps typically include:
– Irregular or outdated security awareness training
– No testing or verification of training effectiveness
– Failing to train new employees promptly
– Lack of specialized training for high-risk roles
– Poor documentation of training completion
Insufficient Documentation
Even when security controls are implemented correctly, lack of documentation can lead to claim denials.
Documentation gaps often include:
– Missing audit logs or evidence of security controls
– Inadequate recording of security incidents and responses
– No formal exception documentation
– Incomplete records of policy implementation
– Failure to document third-party security assessments
Avoiding Claim Denials
To minimize the risk of claim denials, organizations should:
– Review insurance applications with technical and legal experts
– Implement required controls completely, without exceptions
– Document all security measures, including implementation dates
– Perform regular compliance audits against policy requirements
– Engage independent parties to validate security controls
“The best approach is to work with a partner who understands both the technical requirements and the insurance landscape,” advises David Kearns. “Getting ahead of these issues before a claim situation is critical—because once you’re filing a claim, it’s too late to fix compliance gaps.”
How to Document Your Security Posture for Insurers
Documentation: The Key to Smooth Claims Processing
Even with robust security controls in place, inadequate documentation can undermine your cyber insurance coverage. Insurers require clear evidence that security measures were implemented, maintained, and effective prior to any incident.
“Documentation isn’t just paperwork—it’s protection,” states Michael Wolf, President of Wolf Consulting. “When a claim is filed, the burden of proof falls on the policyholder to demonstrate compliance with all policy requirements.”
Creating a Documentation Framework
Effective documentation for cyber insurance should be comprehensive, current, and easily accessible during claims processing. This requires a structured approach:
Policy and Procedure Documentation
Begin with formal, written policies that outline your security program:
“Insurers want to see that security isn’t ad hoc but follows established procedures,” explains David Kearns, Business Development Manager. “Written policies demonstrate that your organization takes security seriously and has thought through various scenarios.”
Essential policy documentation includes:
– Information security policies with review and approval dates
– Access control procedures including authorization processes
– Password and authentication policies
– Incident response plans with clear roles and responsibilities
– Business continuity and disaster recovery procedures
– Data classification and handling requirements
– Vendor management and third-party risk policies
Implementation Evidence
Beyond stating what should be done, you need proof that controls are actually in place:
“We often see a gap between what companies say they do and what they can prove they’ve done,” notes Will Palmer, VP of Growth. “Implementation evidence closes that gap.”
Effective implementation documentation includes:
– Screenshots of security settings (with timestamps)
– Configuration exports from security systems
– License agreements for security tools
– Network diagrams showing security controls
– Change management records for security implementations
– Deployment logs and verification records
Ongoing Compliance Evidence
Security is not a one-time implementation but an ongoing process that requires continuous documentation:
“The most convincing documentation shows not just that controls were set up, but that they continue to function as intended,” says Kevin Gorny, Technical Services Manager.
Ongoing compliance documentation should include:
– Regular security assessment reports
– Vulnerability scan results and remediation records
– Patch management logs showing timely updates
– Backup testing and verification reports
– Event logs and alert monitoring records
– Access review and user account audit trails
– Security incident records and resolution documentation
Documenting Specific Control Areas
Multi-Factor Authentication (MFA)
Given the importance of MFA in cyber insurance requirements, documentation in this area should be particularly thorough:
“For MFA, insurers want to see both the policy and proof of 100% implementation across required systems,” explains Matthew Young, Project Consultant. “Exceptions are red flags that need special documentation.”
Effective MFA documentation includes:
– Settings showing MFA enforcement at the organizational level
– Reports showing user enrollment in MFA
– Exception documentation with risk assessments and compensating controls
– Screenshots of MFA prompts on critical systems
– Logs showing successful MFA challenges
Backup and Recovery
Documentation for backup systems should demonstrate both implementation and testing:
“Backup documentation is often scrutinized closely in ransomware claims,” notes Cliff Platt, Project Manager. “Insurers want to see that you could have recovered without paying a ransom.”
Key backup documentation elements include:
– Backup policies with retention schedules
– Evidence of encryption for backup data
– Air-gap or immutability configuration details
– Successful restoration test logs
– Offsite storage arrangements
– Access controls for backup systems
Security Awareness Training
Training documentation should demonstrate both completion and effectiveness:
“If an employee action leads to a breach, the first thing insurers check is whether they were properly trained,” says Will Palmer. “Having participation records and test results can make all the difference in a claim.”
Training documentation should include:
– Training content and materials
– Employee completion records with dates
– Phishing simulation results
– Training frequency and schedules
– Special training for high-risk roles
– New employee onboarding materials
Tools for Effective Documentation
Several approaches can streamline the documentation process:
“The right tools can transform documentation from a burden to an asset,” advises Kevin Gorny. “Automation is key to maintaining current documentation without excessive overhead.”
Consider implementing:
– Security information and event management (SIEM) systems with reporting capabilities
– Compliance management platforms that track control implementation
– Automated documentation tools that capture system configurations
– Centralized policy management systems
– Document repositories with version control
– Regular security assessment frameworks
Documentation Best Practices
Maintain Documentation Currency
Outdated documentation can be worse than no documentation at all:
“Date everything and implement a regular review cycle,” recommends Michael Wolf. “Documentation from last year may not reflect your current environment and could actually hurt your claim if it’s inaccurate.”
Document Exceptions and Compensating Controls
When perfect compliance isn’t possible, document why and how you’re mitigating risks:
“If you can’t implement a required control exactly as specified, document the business reason, the risk assessment, and what compensating controls you’ve put in place,” advises David Kearns. “Transparency about exceptions is better than claims of perfect compliance that can’t be substantiated.”
Create Incident-Ready Documentation
Structure documentation with claims processing in mind:
“Organize your documentation as if you’ll need to hand it to an insurance adjuster tomorrow,” suggests Will Palmer. “That means clear labeling, executive summaries, and easy navigation to find specific controls.”
Conduct Regular Documentation Audits
Periodically test the quality and completeness of your documentation:
“Have someone unfamiliar with your systems try to verify compliance using only your documentation,” says Matthew Young. “If they can’t easily confirm that controls are in place, neither will an insurance adjuster.”
Working with Your Insurer on Documentation
Proactive engagement with your insurer can clarify documentation expectations:
“Ask your insurance provider what specific documentation they expect during claims processing,” recommends Michael Wolf. “Different insurers may have different standards, and it’s better to know before an incident occurs.”
Consider:
– Requesting documentation examples or templates from your provider
– Sharing documentation approaches during policy negotiations
– Including documentation specifications in your policy
– Conducting pre-claim documentation reviews
The Documentation Difference
Comprehensive documentation can be the difference between a paid claim and a denial:
“We’ve seen nearly identical incidents with completely different claim outcomes based solely on the quality of documentation,” notes Will Palmer. “The best security in the world won’t help your claim if you can’t prove you had it in place.”
As cyber insurance becomes more stringent, documentation increasingly serves as the bridge between your security practices and your coverage protection—ensuring that when you need your insurance most, it will be there for you.
Need help implementing these strategies? Contact Wolf Consulting today to build a customized cybersecurity plan that fits your business’s needs.