The Cybersecurity Insurance

Coverage That Doesn’t Actually Cover (Sometimes…)

Buying cybersecurity insurance is like buying car insurance that only covers accidents on Tuesdays. You think you’re protected until something actually happens, then you discover all the ways your policy doesn’t apply to your specific situation.

What I Thought I Knew

My assumption was straightforward: businesses get hacked, insurance pays out, everyone moves on. The cyber insurance market has almost tripled in size over the past five years, so it must be working, right? But when I started looking into this properly, I realized the gap between what businesses think they’re buying and what they’re actually getting might be bigger than anyone wants to admit.

A Real Situation That’s Happening

I’ve been reading about cases where businesses thought their cyber insurance would cover business interruption when ransomware took down their systems. It didn’t. The policy required proof that the attack came from outside their network, but the ransomware had been lying dormant for weeks after entering through a phishing email. The insurance company argued that since the actual encryption happened from inside their network, it wasn’t an “external attack.”

Another case involved a business that discovered their coverage excluded social engineering attacks – which is what most successful breaches actually are. Someone tricks an employee into clicking something or sharing credentials. Apparently, that’s not “hacking” according to their policy.

What The Numbers Actually Show

According to estimates, South African businesses lose 250 million rand annually due to phishing attacks and internet fraud. But here’s what’s interesting:

– Ransomware groups reduced their initial demands by 22% in 2024 to an average of $1.1 million (R19m)
– The average cost of an insider threat incident is estimated at $15 million (R200m)
– Between January 2023 and January 2024, critical infrastructure worldwide was exposed to over 420 million attacks

The real costs aren’t just the ransom payment. It’s the weeks of downtime, lost customer trust, regulatory fines, forensic investigation costs, and ongoing monitoring expenses. Most policies have caps and exclusions that don’t cover these indirect costs.

How Coverage Actually Works vs. What People Think

1. The Exclusion Reality: Most cyber insurance policies exclude:

– Social engineering attacks (the most common type)
– Insider threats (malicious or negligent employees)
– Business email compromise
– Attacks that exploit known vulnerabilities you haven’t patched

2. The Proof Problem: You need to prove you met specific security requirements:

– Regular security training for employees
– Multi-factor authentication on all systems
– Current antivirus and firewall protection
– Regular security audits and penetration testing

Many businesses can’t document these requirements when they need to make a claim.

3. The South African Context: We’re operating where response times from law enforcement, availability of specialized forensic services, and legal frameworks are different from countries where these insurance products were designed. The policies don’t account for these local realities.

What Makes Claims Fail

– You can’t prove the attack was external|
– Your security measures didn’t meet policy requirements
– The incident falls under excluded categories
– You can’t provide proper documentation of losses

The Real Pattern That’s Emerging

From what I’m reading and researching, the businesses that handle cyber incidents best aren’t the ones with the most comprehensive insurance. They’re the ones with the clearest understanding of what they’re actually exposed to and what they’d need to do to recover. Maybe the real value of cyber insurance isn’t the payout – it’s the risk assessment process that forces businesses to understand their vulnerabilities.

What This Means for Your Business

Before buying or renewing cyber insurance, ask:

– What specifically triggers your coverage?
– Can you prove compliance with policy requirements?
– What’s actually excluded from your policy?
– Do your current security measures meet the requirements?

The Uncomfortable Truth

Cybercrime is expected to cost the world $10.5 trillion (Huge number in Rands) annually by 2025. If cyber insurance was really solving this problem, wouldn’t those numbers be going down instead of up?

What This Means for Remote IT Support

As a remote IT support provider, we’re often involved when businesses are thinking about their overall risk management. While we’re not insurance experts, we end up being the ones who help document security measures and understand what businesses are actually vulnerable to. I’m starting to think our role isn’t just about fixing things – it’s about helping businesses understand their actual risk profile and whether their insurance coverage aligns with their real vulnerabilities.

Quick Lessons

– Understand what’s actually covered, not what you think is covered
– Document your security measures continuously
– Test your incident response before you need it
– Consider insurance as one part of protection, not the whole solution
– Remember that prevention is still cheaper than claims

The most comprehensive cyber insurance fails if you can’t prove you met the requirements. The best protection happens when security measures and insurance coverage work together.

Till next time, Mpho 🫡