In 2022, Illinois-based manufacturing company ICS faced a data breach, causing Travelers Insurance, their cyber insurance provider, to take a closer look at their policy. It turned out ICS had failed to implement multi-factor authentication (MFA) across all digital assets as agreed upon in their policy. Travelers Insurance filed a lawsuit and ultimately won, rescinding the policy and leaving ICS far from grateful, now drowning in worry.

Businesses, including yours, recognize the significance of cyber insurance in maintaining competitive advantages and mitigating risks. However, with cyber insurance premiums soaring, ensuring your claims are paid when necessary is paramount.

According to Rusty Goodwin, an Organized Efficiency Consultant at Mid-State Group, denials often stem from inadvertent misrepresentations or omissions by businesses, or failure to update insurers about security practice changes.

To avoid claim denials, consider these four essential steps:

  1. Seek Expert Guidance: Understanding complex insurance policies can be daunting. It's crucial to find a knowledgeable broker who can decipher the legal jargon for you. Brokers can help you comprehend various aspects of the policy, such as deductibles, costs, liability limits, insuring agreements and conditions. Having a broker well-versed in cyber insurance is vital to ensure your needs are met.
  2. Grasp Policy Conditions: Insurance companies expect certain promises from policyholders, known as conditions of the contract. These may include using MFA, password managers, regular data backups and cybersecurity training for employees. Understanding these conditions is pivotal. Many claims are denied due to misunderstandings or non-compliance with these stipulations.
  3. Fulfill Your Promises: It's not enough to merely promise to enhance your cybersecurity measures. You must actively implement them. Similar to homeowners installing security alarms for insurance discounts, businesses need to follow through on their commitments. Promising to use MFA or conduct training won't suffice if these practices are not enforced. Your proactive efforts are the key to ensuring your claims are paid when required.
  4. Maintain Open Communication: Assumptions can be detrimental. Don't assume your IT department understands the intricacies of your insurance policy. Regularly review your policy and maintain transparent communication with your IT professionals. This ensures everyone is on the same page, minimizing the risk of overlooked policy requirements.

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