Cyber Insurance Requirements: Why a Policy Isn’t Enough

What Cyber Insurance Really Covers

At its core, cyber insurance is designed to protect organizations from the financial consequences of digital incidents. A typical policy can help pay for data recovery, regulatory fines, legal defense, forensic investigations, customer notification, credit monitoring, public relations support, and even business interruption costs if your operations grind to a halt.

Some policies may also cover ransom payments, though this is increasingly debated by regulators and varies by provider. When Equifax suffered its 2017 breach exposing the personal data of 147 million people, its $150 million cyber policy absorbed a meaningful portion of the financial fallout. Without that protection, the blow might have been catastrophic.

But while cyber insurance provides a financial buffer, it doesn’t stop the breach itself. And increasingly, insurers are only willing to extend coverage to businesses that can demonstrate strong preventative measures are in place.

Why IT Strategy Is Now Central to Coverage

A decade ago, qualifying for cyber insurance was relatively simple. Companies could fill out a short questionnaire, pay a premium, and walk away with coverage. Those days are gone.

The explosion of ransomware and large-scale breaches has made insurers more cautious. Losses are mounting, payouts are larger, and premiums are rising. To protect themselves, insurers are demanding verifiable proof that clients are actively defending against cyber threats. In other words, your IT strategy is now just as important as your policy.

If your business can’t demonstrate that it has implemented strong security controls, you may face one of two outcomes: higher premiums—or outright denial of coverage. Worse yet, even if you do have a policy, a weak IT posture could lead to a denied claim when you need it most.

When Claims Get Denied

Many business owners assume that if they pay their premium, they’ll be covered. Unfortunately, that’s not always the case. A recent study by the Ponemon Institute found that up to 67% of cyber claims are denied, often for frustratingly preventable reasons.

The most common reasons include:

• Lack of security controls. If you don’t have required safeguards like multi-factor authentication (MFA) or endpoint detection, your claim may not qualify.

• Incomplete documentation. Even if the controls exist, failing to maintain records that prove your systems were compliant at the time of the attack can sink a claim.

• Insufficient incident response. If your team doesn’t follow an incident response plan, insurers may argue that losses were unnecessarily worsened and refuse payment.

Real-world examples bear this out. Sinclair Broadcast Group, for instance, has been locked in a legal battle with its insurers over a 2021 ransomware attack. Despite having $50 million in coverage, at least $20 million in claims remain unpaid as insurers dispute whether the company’s downtime and losses qualify.

And sometimes, insurance simply isn’t enough. The UK logistics company KNP—founded in 1861—was driven into insolvency within three months of a ransomware attack. Even with insurance, gaps in security controls and recovery planning meant the company could not recover quickly enough to survive.

The Security Controls Insurers Expect

To avoid becoming another cautionary tale, businesses need to understand what insurers now expect. While requirements vary by provider, several controls have become near-universal benchmarks.

Multi-Factor Authentication (MFA). Insurers increasingly mandate MFA for email, remote access, and administrative accounts. It’s one of the simplest and most effective defenses against compromised credentials.

Endpoint Detection & Response (EDR). Traditional antivirus is no longer enough. Insurers look for modern tools that can detect and respond to suspicious behavior in real time.

Immutable and Tested Backups. Regular, offsite or air-gapped backups are critical. But insurers want proof that those backups are not just stored, but tested regularly to ensure they can be restored quickly.

Employee Security Training. Since human error drives the majority of breaches, insurers expect documented training programs and phishing simulations to show that staff are part of the defense.

Incident Response Planning. A written, tested incident response plan is a must. This includes clearly defined roles, communication protocols, and procedures for reporting and mitigating damage.

Vendor Risk Management. With supply-chain compromises on the rise, insurers also look for due diligence processes covering third-party vendors who access your data or systems.

Continuous Monitoring. Tools like SIEM (Security Information and Event Management) and 24/7 SOC monitoring demonstrate that you’re not leaving your network unguarded.

Without these safeguards, insurers may simply decline to issue a policy—or worse, deny payment after an attack.

💡 Pro Tip: Backups Are Your Insurance for Insurance

When it comes to cyber insurance, one of the first questions insurers ask is: “Do you have immutable, tested backups?”

Why? Because without reliable backups, even the best policy won’t save your business from prolonged downtime or permanent data loss. Many insurers make proven backup practices a prerequisite for coverage, and weak backup strategies are one of the top reasons claims get denied.

We specialize in backup and disaster recovery solutions that go beyond the basics:

• Immutable backups that can’t be altered or encrypted by ransomware

• Frequent, automated backups for minimal data loss

• Virtualization technology to spin up entire systems in minutes, not days

• Routine testing to ensure you can restore quickly when it matters most

Learn more about our backup and disaster recovery solutions and how they help your business stay resilient—and insurable.

The Cost of Falling Short

The risks of inadequate preparation are staggering. In August 2025, DaVita, one of the largest kidney care providers in the U.S., revealed that a ransomware attack had impacted 2.7 million patients. Even with operations continuing, the company incurred $13.5 million in costs in a single quarter just to handle administrative, forensic, and patient notification expenses.

Closer to home, Farmers Insurance confirmed in 2025 that over 1 million customers’ data was exposed in a breach—names, addresses, and even partial Social Security numbers. Quick detection limited some of the fallout, but the incident highlights how even sophisticated organizations are vulnerable.

And ironically, insurers themselves have become targets. Both Allianz Life and Aflac suffered breaches this year, demonstrating that no sector, not even the insurance industry, is immune. If the very companies selling coverage can be compromised, it underscores the necessity of a layered IT defense alongside a financial safety net.

Where an IT Service Provider Fits In

The good news is that businesses don’t have to figure this out alone. Navigating cyber insurance requirements while running day-to-day operations can be overwhelming. This is where an IT service provider becomes invaluable.

A partner should work with businesses to build and maintain the controls that insurers require—and that good cybersecurity demands. That starts with a full assessment of your environment to identify gaps, followed by tailored solutions like:

• Deploying and enforcing MFA across systems

• Implementing endpoint protection and advanced threat detection

• Establishing immutable, automated backup systems that are tested regularly

• Delivering employee training and phishing simulations

• Drafting, testing, and documenting an incident response plan

• Maintaining audit-ready documentation of all security controls

Equally important, a partner doesn’t just help you qualify for a policy—they help you maintain compliance over time. That ongoing monitoring and documentation ensures that if you ever need to file a claim, you can demonstrate beyond doubt that you had the right safeguards in place.

Cyber Insurance Plus IT Strategy: The Winning Formula

Ultimately, the message is simple: cyber insurance is necessary, but not sufficient. Insurance can help your company recover financially, but it won’t prevent the attack. A strong IT strategy is the shield that minimizes risk in the first place—and the key to unlocking reliable coverage when you need it most.

By aligning cybersecurity with insurance requirements, you can create a dual safety net: one that prevents the worst from happening, and another that cushions the blow when it does.

If your organization is ready to take that next step, we can help. Learn more about our Datastream Cyber Insurance offering, or explore our broader managed IT services that ensure your systems are not only protected, but also insurer-approved.

Final Thoughts

Cyberattacks are not a matter of “if” but “when.” Whether it’s ransomware locking down your files, a phishing attack compromising your email, or a vendor breach leaking customer data, the financial and reputational damage can be devastating.

Insurance provides the funds to recover, but only if your IT environment is secure enough to qualify and compliant enough to validate claims. The businesses that survive are those that treat cybersecurity and cyber insurance as two halves of the same whole.

With a trusted IT partner, you don’t have to choose between focusing on growth and meeting insurer demands. We’ll build the foundation for resilience—so you can run your business with confidence, knowing you’re both protected and covered.