Beyond the policy: a strategic look at the cyber insurance payout gap

For Canadian IT and security leaders, cyber insurance has gone from an optional safeguard to a core component of the risk management stack. However, as the threat landscape evolves, so too do the requirements for obtaining and maintaining these policies. As qualification standards become more rigorous, holding a policy is no longer a simple transfer of risk; it is an ongoing commitment to a higher level of operational maturity.

To understand how organizations are navigating this shift, TELUS Business partnered with IDC Canada to survey over 500 organizations about their experiences with obtaining, maintaining, and using their cyber insurance coverage. The TELUS Canadian Cyber Insurance Study reveals a clear trend: there is a growing disconnect between the coverage organizations believe they have and the reality of their claims experience.

The most critical takeaway is that insurance rarely covers the total cost of a breach. On average, cyber insurance payouts in Canada cover only 60% of total incident costs. This creates a 40% “payout gap” or financial burden the organization has to cover.

Our research shows that 70% of organizations that received a payout reported that the amount was smaller or much smaller than anticipated. The reasons why payouts were often lower than expected include:

Exclusions: The policy did not cover the type of incident experienced (eg: human error) or all elements of the incident.

Recovery cost misalignment: Payouts were reduced because the insurer's assessment of recovery costs did not align with the organization’s actual spending.

Compliance discoveries: During the claims process, insurers discovered that the organization was not fully compliant with the security requirements mandated by the policy.

The majority of organizations - 93% - are concerned about maintaining their policy coverage. And it’s not hard to see why - during their last renewal, over two-thirds of Canadian organizations saw an average premium increase of 19%. At the same time, insurers may require improvements to processes and controls based on their assessment of an organization's security posture, risk exposure, their experience with past claims and the current threat landscape.

To meet requirements and/or lower the cost of coverage, many organizations have had to accelerate their internal security roadmaps:

Mandated controls: 2 in 5 organizations were required to add or improve technical controls, such as Identity and Access Management (IAM), Managed Detection and Response (MDR), and enhanced data security.

Operational lift: 1 in 4 had to implement or expand security processes and functions, including Security Operations Center (SOC), security awareness and vulnerability management programs.

These findings underscore a vital point - cyber insurance is a financial tool, not a security strategy. The goal is to build a posture that is resilient enough that the insurance policy is rarely, if ever, activated.

If you are short on resources, applying these strategies to maintain coverage can be daunting. Working with a cybersecurity partner can provide clarity, help maintain eligibility and broad protection while also alleviating pressure from your IT and security teams, allowing them to focus on other priorities.

At TELUS Business, we specialize in helping Canadian organizations bridge the gap between policy requirements and their actual security posture. Our managed security and advisory services are designed to help strengthen your defenses and support your evolving business needs and policy requirements.

Read the full study to see all the detailed data and insights. Click here to get your copy of The TELUS Canadian Cyber Insurance Study.