Rethinking Cyber Insurance: Why Companies Still Misjudge Their Risk

Christopher Votta, Senior Vice President, Regional Professional, Management, & Cyber Liability Practice Leader, Wholesure

Christopher Votta is Senior Vice President at Wholesure, leading regional professional, management, and cyber liability practices. With 17+ years in underwriting and brokerage, he’s recognized nationally for specialist expertise, client-focused risk solutions, and award-winning contributions to wholesale insurance.

The Myth of the Cyber “Safety Net”

For many businesses, cyber insurance has become a standard line item, something you buy, file away, and assume will save the day if things go sideways. But that assumption is exactly where organizations get into trouble. The biggest issue in cyber insurance today isn’t a lack of coverage. It’s a lack of understanding.

Too many leaders believe that simply having a policy means they’re protected. In reality, the gap between what companies think their insurance covers and what it actually covers is often wide enough to drive a ransomware gang through.

One of the most persistent misconceptions is that cyber insurance will automatically absorb the fallout from any incident. Ransomware hits? Covered. Data stolen? Covered. Operations down? Covered.

Except it’s not that simple.

Cyber policies vary dramatically in scope, exclusions, and conditions. Many require companies to maintain specific security controls or follow certain procedures. If those expectations aren’t met, coverage can be reduced or denied entirely. Insurance isn’t a substitute for cybersecurity. It’s a financial backstop, not a force field.

What Insurance Can and Can’t Do

Cyber insurance does transfer financial risk. It can help pay for forensic investigations, legal fees, notification requirements, ransom payments, business interruption losses, and reimbursement for fraudulent funds transfers.

But it can’t restore customer trust, repair brand damage, recover stolen intellectual property, prevent regulatory scrutiny, or undo operational downtime. Those burdens remain squarely on the organization, no matter how robust the policy.

The Blind Spots Leaders Overlook

Many companies still view cyber risk through a narrow lens, focusing on headline‑grabbing attacks while ignoring the quieter, more common threats that cause significant damage.

Among the most overlooked risks:

Cyber insurance isn’t a substitute for cybersecurity. It’s a financial backstop, not a force field.

• Vendor and supply chain vulnerabilities

• Business email compromise

• Operational technology weaknesses

• Insider threats

• Privacy‑related regulatory penalties

• Misconfigurations and credential theft

These aren’t dramatic incidents, but they’re often the most expensive.

Controls vs. Coverage

A useful way to think about the relationship:

• Controls reduce the likelihood of an incident.

• Insurance reduces the financial impact of an incident.

Neither replaces the other. As insurers tighten underwriting standards, companies without strong controls, MFA, endpoint protection, privileged access management, and incident response plans may face higher premiums or outright denial.

Signs You’re Underinsured

Several red flags suggest a company’s coverage no longer matches its exposure:

• Coverage limits haven’t changed despite business growth

• No policy review in over a year

• New technologies or vendors added without reassessing risk

• Leadership assumes “IT has it handled”

• Incident response plans are outdated or untested

• Premium increases spark confusion instead of analysis

A Smarter Approach

Leaders who want a more resilient strategy should treat cyber insurance as part of a broader risk ecosystem. That means conducting realistic exposure assessments, aligning coverage with business priorities, reviewing policies annually, and involving legal, finance, IT, operations, and executive leadership in the process.

The organizations that weather cyber incidents best aren’t the ones with the biggest policies, they’re the ones that understand their risk, strengthen their controls, and make sure their coverage truly matches their exposure.