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Why Cyber Insurance Claims Get Denied

Over

27%
of claims are denied or underpaid. Learn how to avoid the traps and secure your coverage.

27%

of claims denied or partially paid

41%

involve ransomware attacks

56%

come from small businesses

Top Reasons for Denials

Inadequate Security Controls

Insurers now require proof of basic protections like multi-factor authentication (MFA), endpoint detection, and regular patching. Missing these often voids coverage.

Real Example:

A medical practice's $200K ransomware claim was denied because they lacked MFA on their remote access systems.

Policy Exclusions

Common exclusions that catch businesses off guard:

  • Acts of war (e.g., NotPetya attack denials)
  • Known unpatched vulnerabilities
  • Social engineering losses
  • PCI DSS non-compliance fines

Human Error & Insider Threats

Over 60% of breaches start with employee actions. Many policies exclude claims stemming from:

  • Phishing clicks that bypass training
  • Malicious actions by employees/contractors
  • Failure to revoke access for former staff

How to Avoid Denials

  • Pre-Approval Audit

    Have a third-party security assessment before applying to identify gaps insurers will flag.

  • Document Everything

    Maintain logs of security training, patch management, and access controls to prove compliance.

  • Negotiate Exclusions

    Work with brokers to remove unreasonable clauses (e.g., "any nation-state involvement voids coverage").

  • Incident Response Plan

    Insurers often deny claims if you delay reporting or lack forensic evidence. Have a plan ready.

Get Insurance-Ready with Red Dog Security

Our Insurance Qualification Assessment identifies exactly what insurers require—and helps you implement it.