Cyber insurance has often been accused of failing to deliver when it’s needed most. David Anderson, a specialist at Woodruff Sawyer, has written “Does Cyber Insurance Pay Out?” to set the record straight. Backed by data and years of expertise, Anderson explains how tailored cyber insurance policies protect businesses, attacking the myth that these policies don’t pay out.
Woodruff Sawyer, is a leading insurance brokerage and risk management firm, specializes in helping businesses navigate the complexities of cyber insurance. Anderson’s analysis highlights why properly structured cyber insurance is a critical shield for modern businesses.
Data Proves Policies Work
The idea that cyber insurance fails to pay out is simply unfounded. Recent data from the NetDiligence 2024 Cyber Claims Study reveals:
- Over $4 billion in claims were paid across 10,464 incidents in just four years.
- Over 400 claims exceeded $1 million each, while ransomware payouts for middle-market businesses averaged $500,000 per event.
- Large enterprises faced losses in the eight-figure range, demonstrating the importance of coverage for major disruptions.
JD Power corroborates these findings. A survey showed 97% of businesses with cyber insurance reported adequate coverage for their losses. Companies with policies also rated their overall satisfaction at 7.19 out of 10, affirming the value of these programs.
“Businesses often assume cyber insurance is ineffective because they don’t fully understand their coverage or align it with their specific risks,” Anderson explains. “The data tells a different story—tailored policies pay out.”
Comprehensive Coverage Protects Against Gaps
A critical factor in claims success is the quality of coverage. Anderson urges businesses to evaluate the fine print in their policies.
- Confidential Data: Ensure your policy goes beyond traditional definitions of personally identifiable information (PII) to include GPS data, biometric information, and device interaction logs.
- Insured Systems: Confirm that operational technology, building management systems, and cloud environments are included in the scope of coverage.
“Off-the-shelf policies often leave businesses exposed to gaps,” Anderson warns. “Tailored coverage is the solution to ensuring your risks are fully addressed.”
Coordinating Vendors for Effective Incident Responses
Misalignment between insurers and vendors can slow down claims processes and escalate costs. Many policies require businesses to use pre-approved vendors for incident response. Anderson recommends proactive planning to avoid these issues:
- Align Vendors Early: Work with your insurer to coordinate contracts and ensure your preferred vendors are pre-approved.
- Leverage Risk Services: Many cyber policies include complimentary or discounted risk management tools like digital forensics and crisis PR support. Use these services to strengthen your defense strategy.
“Time is critical during a cyberattack,” Anderson says. “Proactively aligning vendors with your insurer ensures smoother operations when it matters most.”
Why You Should Trust Established Insurers
Anderson advises businesses to be wary of low-cost policies with minimal coverage. While tempting, these can leave businesses vulnerable during major incidents. Established insurers offer significant advantages:
- Broader coverage that addresses evolving cyber risks.
- Experienced claims handlers who streamline the payout process.
- Greater financial stability, ensuring claims are resolved without delays.
“In cyber insurance, you get what you pay for,” Anderson notes. “Cutting corners with a bargain policy often costs businesses far more in the long run.”
Partnering with Expert Brokers
With approximately 150 insurers offering cyber insurance, navigating policy terms can be overwhelming. Anderson emphasizes the importance of working with brokers who specialize in cyber risks.
“An experienced broker understands the nuances of coverage and ensures policies align with the specific risks of your business,” he explains. “This expertise can make the difference between a smooth claims process and a costly denial.”
