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Top Reasons Cyber Insurance Claims Are Denied

You buy cyber insurance believing it will protect you when trouble strikes. But what happens if, when you finally need…

You buy cyber insurance believing it will protect you when trouble strikes. But what happens if, when you finally need it, the claim does not go through?

Here is a fact that might surprise you: more than 40% of cyber insurance claims are rejected. 

The biggest reason? Missing or weak security controls. In fact, 26% of rejected claims fall into this category. 

One simple example is not running phishing simulations for employees. 

If your team is not trained to spot phishing emails, insurers can say you did not take enough care to protect your business.

Cyber insurance is important, but it is not a guaranteed shield. To make it work for you, you need to know the common reasons why claims are denied.

Mitigata Helps You Avoid Claim Denials Before They Happen


Most cyber insurance claims are denied because businesses fail to meet the hidden requirements often buried in policies. Weak security controls, unclear documentation, or slow response during an attack can all give insurers a reason to reject your claim.

This is where Mitigata changes the story.

We help businesses secure policies that are compliant and aligned with real-world risks.

With 800+ companies protected and 500+ cyber insurance products, we match you with the right coverage and ensure your security controls meet insurer standards.

When Cyber Incidents Strike, We Make Claims Work for You

With immediate incident handling, legal guidance, and data continuity, Mitigata prevents denials and minimizes financial risks.

But we don’t stop at policy placement. Our platform ensures that when an incident strikes, you are not scrambling. Mitigata’s security network handles 70% of cyber claims through swift action, which includes:

  • Immediate response to contain incidents before they spiral.
  • Ransomware negotiation that keeps costs down.
  • Legal and cyber law consultation to help you navigate complex jargon.
  • Smart PR management to protect your reputation.
  • Data migration and workload portability with a 10-minute SLA for business continuity.

This fast, coordinated response has already saved clients more than $500,000 in claims, while helping secure up to 95% claim coverage.

Check out Mitigata’s step-by-step guide to applying for cyber insurance

Top Reasons Cyber Insurance Claims Get Denied

The following are the most common reasons for cyber insurance claim denials:

  1. Filing Under the Wrong Clause

We have seen this one as the most frequent reason for multiple insurance claim denials. Imagine your company experiences a ransomware attack that encrypts all your systems, forcing you to shut down operations for three days. 

If you file this claim under “data breach expenses” because data was involved, your insurer will likely deny it. 

Because no data was actually stolen or exposed, your systems were simply locked. This scenario falls under “business interruption” or “cyber extortion” coverage instead.

  1. Delayed Notification

Cyber insurance policies almost always include strict notification requirements – usually requiring you to inform your insurer within 24 to 72 hours of discovering an incident. Many claims are denied simply because companies wait too long to report.

Remember: your insurer needs to be notified when you discover a potential incident, not when you’ve finished investigating it or confirmed how bad it is.

  1. Policy Exclusions You Didn’t Know About

Cyber insurance does not provide complete protection against every incident. The majority of policies have limitations for specific situations, such as employee negligent actions, state-sponsored attacks, and losses resulting from known but unpatched vulnerabilities.

For example, if a conflict resulting from a nation-sponsored cyberwar caused your systems to be breached, your insurer might characterise this as an “act of war” that is often not covered.

The silent clause of cyber insurance war exclusion is enough to put your business at risk. Check out this blog to learn how this exclusion can impact you.

  1. Poor Security Practices and Prevention

Insurers expect you to maintain reasonable cybersecurity measures. If your claim reveals that you failed to implement basic security controls, your coverage may be denied based on breach of warranty or failure to meet policy conditions.

Example: After a data breach, your insurer investigates and discovers that your company hadn’t updated critical software in over two years, had no multi-factor authentication enabled, and wasn’t running antivirus software. 

These findings suggest gross negligence in cybersecurity practices. In such cases, the insurer will deny the claim.

  1. Lack of Documentation

Even if you have good security practices, you need to prove it. Many claims are denied because companies cannot provide adequate documentation showing they maintained the security controls they claimed to have in place.

  1. Third-Party Faults

Sometimes the weak link isn’t you, but a vendor or partner. For example, if a cloud provider or payment processor experiences a breach that affects your firm, the insurer may deny your claim, citing the third party’s liability.

  1. Misrepresentation or Nondisclosure

When purchasing cyber insurance, you are requested to provide information about your systems, safety measures, and the types of data you handle. 

If you overstated your security configuration or minimised the amount of important data you save, it can backfire. Insurers may decline your claim due to misrepresentation.

Secure Cyber Insurance Approvals With Mitigata’s Expert Support

Our 24/7 support team manages incidents immediately, preventing claims from being rejected.

What Insurers Look For When Evaluating a Cyber Claim

When a cyber incident occurs and you file a claim, the insurance company does not just issue a check.

Insurers use a rigorous screening process to decide whether the claim is valid and falls within the scope of your policy. Some of the important things they evaluate include:

Policy Coverage and Clauses

Insurers first determine if the type of attack you received is covered by your policy. For example, if your policy covers data breaches but not ransomware, your claim for ransomware may be denied.

Timely notification

Insurers expect to be contacted soon following an occurrence. Delays in reporting can make them suspicious, as late notifications could intensify the impact of the attack and limit their capacity to fix damages.

Security Controls in Place

Most insurance companies require businesses to follow basic security procedures such as multi-factor authentication (MFA), frequent system updates, firewalls, and employee training. If these are not implemented, your claim may be questioned.

Evidence and Documentation

Insurers will request complete documents, including incident reports, security logs, and evidence of preventative measures taken. Without proper documentation, even a valid claim may struggle to get approval.

Nature and scope of the incident

What type of attack took place, how it occurred and what type of data was impacted. This helps in understanding which coverage section applies.

Confused between so many insurance providers? Check out these top cyber insurance companies and their comparison in this guide.

How to Avoid Cyber Insurance Claim Denials

Prevention is always better than dealing with a denied claim after a crisis. Here are practical steps to ensure your cyber insurance claim gets approved when you need it most:

Before purchasing coverage:

  • Accurately disclose all relevant information about your data assets, security practices, and previous incidents
  • Understand your policy exclusions and limitations thoroughly
  • Work with an experienced broker who can match coverage to your actual risk profile

After purchasing coverage:

  • Implement and maintain all required security controls specified in your policy
  • Document everything, such as security audits, training sessions, software updates, and incident response drills
  • Review your policy annually as your business and risk profile evolve
  • Establish a clear incident response plan that includes immediate insurer notification

When an incident occurs:

  • Notify your insurer immediately, even if you’re still investigating
  • Preserve all evidence and logs related to the incident
  • Follow your insurer’s guidance on forensic investigators and legal counsel
  • Keep detailed records of all response costs and business disruption impacts

Simplify Your Cyber Insurance Claim Process

Around-the-clock expert assistance ensures claims are filed correctly and processed quickly.

Real-World Scenarios: What Went Wrong

Learning from others’ mistakes can save you from similar claim denials. Here are three notable cases that illustrate common pitfalls:

  1. International Control Services vs. Travelers Property Casualty Company

The Case: International Control Services faced a ransomware attack and filed a claim with Travelers.

The Issue: Travelers denied the claim, arguing the company failed to properly implement multi-factor authentication (MFA), a requirement for coverage.

Lesson: Meeting baseline security conditions like MFA isn’t optional. If your insurer requires it, failing to comply can instantly invalidate your claim.

  1. BitPay vs. Massachusetts Bay Insurance Company

The Case: BitPay, a global crypto payment provider, lost $1.8 million after hackers phished the credentials of its CFO via a compromised business partner.

The Issue: The insurer denied the claim, stating the loss was not “direct.” Because the attack originated through a partner’s systems, it didn’t meet the policy’s definition of covered losses.

Lesson: Cyber risk often extends beyond your walls. Always clarify with your insurer whether vendor-related or indirect losses are covered.

Learn about the cyber insurance cost and premiums in our expertly curated guide!

  1. Mondelez International vs. Zurich Insurance Group

The Case: Mondelez suffered over $100 million in damages from the NotPetya ransomware attack in 2017. When it filed a claim, Zurich denied it under the “war exclusion” clause, arguing the attack was linked to Russian state actors.

The Issue: The legal battle highlighted a major issue – can a nation-state-backed cyberattack be considered an “act of war”?

Lesson: Policy exclusions can be broad. Companies must be aware of how insurers may interpret ambiguous terms like “warlike action” in the context of cyber incidents.

Conclusion

Cyber insurance can be a lifeline after an attack, but only if you understand your coverage, comply with its guidelines, and accurately report events. Otherwise, a cyber insurance coverage denial can leave your company financially exposed at an important time.

That’s why it’s critical to work with the best cyber insurance experts.

As India’s top cyber resilience company, we have provided complete cyber insurance plans to over 600 businesses, ensuring cyber resilience and compliance so that claims do not get trapped in loopholes.

Contact Mitigata today and secure a policy that truly has your back!

Janardhan N

Janardhan is a seasoned growth marketing expert with over 8+ years of experience in performance marketing. With a strong track record of driving brand growth via strategic content strategies, he has helped multiple businesses elevate their online presence and achieve measurable results.

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