The Evolution of Cyber Insurance
From Simple Forms to Strategic Alignment
The cyber insurance market has undergone a fundamental transformation. What was once a simple, checkbox-driven process has become one of the most demanding indicators of an organization's cybersecurity maturity.
This shift has been driven by a rise in sophisticated threats and the staggering financial losses they cause. Insurers are no longer just underwriting risk; they are shaping the standards that define what "good cybersecurity" looks like.
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Rising Losses and the Maturation of the Market
Why It Changed: Losses Drove Maturity
Early cyber insurance applications were generic and rarely reviewed in depth. As ransomware and supply chain breaches increased, insurers faced losses that were both frequent and severe.
According to NetDiligence's 2024 Cyber Claims Study, ransomware incidents represented less than one fifth of total claims but accounted for more than 90 percent of total losses. IBM's 2024 Cost of a Data Breach Report estimated the average breach cost at 4.45 million dollars, the highest on record, while Coveware reported that average ransomware payments grew by over 25 percent year over year.
This escalation forced the insurance industry to mature by necessity. Over a three-year span ending around 2021, the number of claims paid grew by more than 200 percent. To stay viable, insurers adopted tighter underwriting standards and far more detailed application processes.
The New Standard: Depth, Accuracy, and Legal Accountability
The modern cyber insurance application now reads more like a security audit. Questions are technical, specific, and often require collaboration between IT, compliance, and leadership teams to complete accurately.
Equally important, many states have backed these applications with real legal consequences. It is now common for cyber insurance forms to reference state laws regarding false statements or misrepresentation. Knowingly providing incorrect or incomplete information can trigger insurance fraud statutes, carrying significant fines or even imprisonment.
Here are a few examples:
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California: Knowingly submitting a false or fraudulent claim for payment of a loss is a crime and may result in fines or state prison time.
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Delaware: Filing a claim or statement containing false or misleading information is a felony offense.
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Florida: Providing false information on an insurance application is a third-degree felony punishable by fines and imprisonment.
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Indiana, Rhode Island, Texas, and others: Similar provisions make intentional misrepresentation a prosecutable crime.
The takeaway is simple: accuracy and transparency are now essential. False or incomplete information is not just a compliance risk; it is a legal one.
What This Means for Businesses
As an MSP, we assist customers with their cyber insurance applications regularly. The process can be time-consuming and complex, but it is also an opportunity. Organizations that understand and meet these requirements are not just protecting their insurability; they are strengthening their overall security posture.
Savvy carriers are no longer simply evaluating risk. They are promoting stronger cybersecurity across the board by ensuring that insured organizations meet clear, enforceable standards. This alignment benefits everyone. When security practices and insurance criteria are synchronized, businesses gain both coverage and confidence.
Carrier Spotlight: Tokio Marine HCC (TMHCC)
Tokio Marine HCC is one of the carriers leading this more mature, structured approach. Their NetGuard Plus Application stands out for its clarity and precision. It is well-organized, technically sound, and written in language that both business and IT leaders can understand.
Right from Question 4, TMHCC dives into core data risk categories including PII, PCI, and HIPAA. Instead of relying on acronyms, they define exactly what they mean by private or sensitive information:
"Any information or data that can be used to uniquely identify a person."
This clarity removes ambiguity and ensures that organizations know exactly what they are attesting to. For security professionals, that definition immediately maps to specific controls and compliance requirements.
The following questions in this section extend logically to physical characteristics of a person (indicating HIPAA-relevant data) and to credit card transactions (PCI-DSS). A "Yes" answer to any of these identifies regulatory obligations and directs attention to the controls needed to remain compliant.
The takeaway: TMHCC's form does not just assess risk; it educates the applicant on what data categories carry the greatest exposure and what standards apply to them.
Carrier Spotlight: Travelers
Travelers is another carrier that has earned recognition for the sophistication of its cyber insurance documentation. All of their forms are publicly available, which allows organizations to compare and prepare in advance.
One of their standout documents is the MFA Supplement, which clearly defines the different types of Multi-Factor Authentication required. This separate supplement removes guesswork and reinforces the importance of MFA as a foundational control.
The three key areas of focus are:
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MFA for remote network access: Ensures users connecting through VPNs or remote gateways are using MFA.
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MFA for administrative access: Protects privileged accounts and internal systems.
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MFA for email access: Secures user mailboxes from credential-based compromise.
Question # 3 in the supplement makes a particularly important point:
"In addition to remote access, MFA is required for the following including such access provided to third-party service providers."
This detail highlights a critical oversight in many organizations: third-party access. Vendors and consultants often have deep access into systems and data, sometimes more than employees. Travelers' approach reinforces the need to apply MFA controls universally, including to external users.
The Bigger Picture: Compliance as Protection
These evolving insurance requirements are not designed to make life harder for businesses; they are designed to make the system more sustainable and protective for all parties. By enforcing stronger baseline security controls, insurers are not just mitigating their own risk but helping policyholders reduce the likelihood and impact of incidents.
The growing presence of fraud warnings and legal language is a sign of how serious this alignment has become. False statements can lead to denied claims, lawsuits, and even criminal charges. But honest, accurate applications backed by mature controls create real resilience.
Cyber insurance has evolved from a simple financial safety net into a strategic benchmark for cybersecurity readiness. The process may be more demanding than ever, but the reward is stronger protection and genuine peace of mind.
For organizations seeking to navigate this new environment, partnering with experts who understand both the technical and regulatory landscape makes the process manageable and valuable. The result is not just compliance, but confidence that your organization is both protected and prepared.