Why do we need cyber insurance?
Cyber threats continue to grow in complexity and frequency. Businesses not only have to manage the incident effectively but also need to ensure they can recover operationally and financially from the associated costs, i.e., operational downtime, customer loss, post-breach response, regulatory fines, and more. According to the Ponemon Institute’s, Cost of a Data Breach Report 2024, the average cost of a data breach globally was $4.88 million in 2024 – a 10% increase from 2023 ($4.45 million).
Cyber insurance is an essential part of any organisation’s business continuity and risk management strategy, and not only helps companies to recover financially but can also provide access to critical expertise in the aftermath of an attack. It fills the critical gaps that traditional insurance policies often don’t cover.
It’s important to know that, unlike many Errors & Omissions (E&O) or professional liability policies, cyber insurance typically doesn’t require a finding of negligence to trigger coverage. That means it can respond more broadly and quickly in the event of a cyber incident. For example, a law firm might have some protection for the loss of client data under its professional liability policy, but that coverage often excludes or severely limits key incident response costs—such as hiring forensic investigators, legal counsel, notification services, or crisis communications support. Cyber insurance specifically covers these first-party expenses, helping firms manage, contain, and recover from an attack more effectively.
No business should be without cyber insurance—if you hold valuable data, whether that’s personally identifiable information (PII), payment card information (PCI), protected health information (PHI), or sensitive business information, you need to be covered. Sectors like manufacturing, utilities, and other operators of critical infrastructure are increasingly becoming targets of cyberattacks because of their large-scale impact and valuable data. They have unique operational technology (OT) risks, i.e., physical disruption, downtime in production lines, safety hazards, and severe supply chain impacts that should be covered.
What does cyber insurance cover?
Cyber insurance policies offer more than just financial protection—they provide access to specialised legal counsel who help organisations navigate the complex legal landscape following a cybersecurity incident. These legal experts are instrumental in retaining forensic investigators, preserving attorney-client privilege, and managing potential litigation or regulatory investigations.
Coverage typically extends to a broad range of incident response expenses, including hiring forensic specialists to determine the cause and scope of the breach, assist with remediation, and restore systems to normal operation. In cases of ransomware, policies often include cyber extortion support, such as negotiation assistance and facilitation of ransom payments.
Additionally, if an incident leads to business interruption, data loss, or reputational damage, cyber insurance may cover lost income, data recovery, legal expenses, regulatory fines, and services like customer notification and credit monitoring.
Policyholders can gain access to this preferred network of incident response vendors—including forensic experts, legal counsel, extortion negotiators, and public relations specialists—at discounted rates or no extra cost. Some cyber insurers will also be open to recommendations of who you would prefer to partner with if you have existing relationships. This way, in the event of a breach, you can quickly mobilise trusted professionals who are familiar with the policy or your business and can deliver efficient, cost-effective support, while minimising disruption, reputational damage, and recovery time.
Many businesses may not be aware that with cyber insurance, you can also gain a range of proactive services designed to help organisations reduce risk before an incident occurs. Many policies provide access to risk assessments, privacy awareness training, and tabletop exercises that prepare teams to respond effectively to potential threats.
If you decide to pay a ransom, are you still covered by cyber Insurance?
The majority of cyber insurance policies provide affirmative coverage for costs to pay a ransom or cyber extortion. Threat negotiation is ultimately a decision that needs to be made by the business in conjunction with the Insurer, and many factors weigh into this decision.
At Sygnia, we have strong cyber extortion specialists who work alongside our incident response teams to help determine if paying the ransom is the necessary route of action, and they will diligently carry out an OFAC Sanctions check to ensure we comply with local law.
We advise our clients and prospects that if they are willing to negotiate, the objectives are to protect the remaining assets, reduce the incident exposure time, the repercussions of a double or triple extortion, and to walk away with a reduced payment, if they need to pay at all.
Why are businesses reluctant to take out cyber insurance policies?
It’s a somewhat outdated perception, but cost is typically the biggest deterrent. Premiums are much more reasonable now, especially for organisations with strong cybersecurity controls in place. Insurers often reward companies with lower rates if they demonstrate robust risk management practices like multi-factor authentication, regular backups, and endpoint detection and response.
Some organisations worry that insurer-driven assessments or real-time tools might expose weaknesses in their security posture and that this could be used against them. In reality, proactive monitoring services are meant to help, not punish. It enables both the insurer and the organisation to identify risks early on and reduce the chances of a major incident: a win-win for both parties.
What are the consequences of not being cyber-insured?
Unfortunately, without cyber insurance cover, a company must pay all out-of-pocket costs—it can be a catastrophic amount that includes everything from investigating and fixing the incident to handling legal fees, regulatory fines, and customer notifications.
Organisations will also miss out on discounted rates for expert vendors like digital forensic firms, legal counsel, and PR specialists, making their recovery slower and more costly. And, as mentioned earlier, many cyber insurance companies also offer valuable proactive services, such as risk assessments and training, that help prevent incidents in the first place.
What is the best way to choose a cyber insurance provider?
Work with an experienced cyber insurance broker who understands their industry, size, and specific risk profile. A skilled broker can help evaluate a company’s cybersecurity maturity, regulatory environment, and exposure to risks like ransomware, data breaches, or operational disruption and make sure that vendors the company has pre-existing relationships with become part of the response.
Smaller organisations with limited in-house IT resources may benefit from a more turnkey policy that offers pre-selected vendors and streamlined response services. In contrast, larger, more sophisticated companies often prefer greater flexibility, such as the ability to choose from a broad panel of vendors or even include trusted providers they already work with by endorsement.
A knowledgeable broker will also guide the company in selecting appropriate coverage limits, deductibles (retentions), and policy features that align with their risk tolerance, contractual obligations, and overall cyber risk strategy. A decision shouldn’t be based on price; it’s more important that the policy fits the organisation’s specific operational and risk needs.
