The Role of Security Awareness in Cyber Insurance

As cyber threats grow more sophisticated, businesses need both cyber insurance for financial protection and security awareness training to prevent attacks in the first place. Without proper training, employees are more likely to fall for phishing scams or other cyber threats, leading to costly breaches.

The World Economic Forum's Global Cybersecurity Outlook 2025 found that two out of three organizations face critical cybersecurity skills shortages, and only 14% feel prepared to handle threats. Insurers have taken notice—many now require security awareness training as part of their policies. Without it, businesses risk higher premiums, denied claims, and greater financial exposure.

In this blog, we’ll explore how security awareness helps businesses reduce insurance claims, lower premiums, and strengthen cyber resilience.

How Security Awareness Impacts Cyber Insurance

Insurers don’t just look at how a company responds to cyber incidents—they also assess how well it prevents them. Businesses that invest in security awareness training prove they are actively reducing risks, which helps them secure lower premiums, better coverage, and stronger policy terms.

1. Reducing Claims and Losses

The majority of cyber incidents stem from human error, such as clicking on phishing links or falling for social engineering attacks. Implementing a security awareness training program significantly reduces these risks by:

• Decreasing successful phishing attempts through phishing simulations.
• Minimizing financial losses by identifying and reporting threats early.
• Demonstrating proactive risk management to insurers, often leading to lower premiums.

According to the Ponemon Institute, companies that invest in security awareness training save an average of $5.4 million in breach-related costs, proving that educated employees are a key defense against cyber threats.

2. Improving Insurance Terms

Insurers assess a company's cybersecurity posture when determining premiums and policy terms. Organizations that invest in security awareness are seen as lower risk, leading to:

• Lower premiums (with some insurers offering discounts of up to 20%, depending on risk factors and security measures in place).
• Higher coverage limits for businesses with strong cybersecurity programs.
• Better renewal terms, avoiding premium hikes after an incident.

3. Compliance with Policy Requirements

Many cyber insurance policies now mandate security awareness measures to qualify for coverage. Failing to meet these requirements can lead to:

• Claim denials for breaches caused by employee negligence.
• Higher policy costs due to increased risk exposure.
• Legal and regulatory fines for non-compliance.

BitPay’s Phishing Attack and Insurance Claim Denial

In one case, BitPay, a cryptocurrency payment provider, lost $1.8 million after a phishing attack compromised its Chief Financial Officer (CFO). When BitPay filed a claim, Massachusetts Bay Insurance Company denied it, arguing that the breach came through a third-party partner rather than BitPay’s own systems. This case highlights the importance of employee training to prevent phishing attacks and the need for businesses to carefully review their cyber insurance policies to ensure full coverage. (Source)

Watch the episode of Keepnet Security Awareness Podcast Series to have a deeper look at cyber insurance essentials.

Security Awareness as an Insurance Requirement

Cyber insurers know that trained employees are the first line of defense against attacks. To reduce risks and claims, many insurers now reward companies that invest in security awareness training and phishing simulations with:

• Lower premiums (Some insurers, like Coalition, offer reduced premiums for policyholders who implement security awareness training programs.)
• Expanded coverage (Insurers often provide higher coverage limits to businesses with strong incident response strategies, as they demonstrate a lower risk profile, making claims less likely.)
• Security tool integration (Some insurers partner with cybersecurity providers to offer training tools).

Explore Keepnet’s Phishing Simulator to strengthen employee awareness and qualify for cyber insurance incentives.

Case Study: Cottage Health’s Denied Cyber Insurance Claim

Cottage Health System suffered a data breach when a third-party vendor stored unencrypted medical records of 32,000 patients on an unsecured server, making them publicly accessible online. The breach led to a $4.1 million class-action lawsuit.

When Cottage Health filed a claim with Columbia Casualty Company, the insurer denied coverage, stating that the company failed to maintain required cybersecurity measures. The policy included a clause requiring continuous updates and implementation of cyber risk controls, which Columbia argued had not been met. As a result, the insurer refused to cover the financial losses.

This case highlights the importance of meeting all cybersecurity requirements in an insurance policy. Simply having coverage is not enough—businesses must actively maintain their security measures to avoid claim denials after a breach.

Best Strategies to Align Security Awareness with Cyber Insurance

To qualify for better cyber insurance terms and reduce premiums, businesses must show proactive security efforts. Insurers favor organizations that educate employees, simulate real threats, and track security improvements. Here’s how to align your security awareness strategy with insurer expectations:

• Make Training Continuous – Cyber threats evolve, so ongoing security awareness training is more effective than one-time sessions.
• Simulate Real Threats – Running realistic phishing and social engineering tests ensures employees are prepared for actual attacks.
• Streamline Incident Reporting – An easy-to-use reporting system encourages quick response and prevents threats from escalating.
• Use Data to Improve Security – Tracking training participation, response times, and incident reports helps businesses demonstrate risk reduction to insurers.
• Align Security with Business Goals – Collaborate with cybersecurity experts and insurers to tailor security measures that meet policy requirements and reduce premiums.

Keepnet Human Risk Management Platform: Strengthen Security & Reduce Insurance Costs

Keepnet Human Risk Management Platform helps organizations detect threats, train employees, and minimize cyber risks:

• Threat Intelligence – Identifies if employee data was exposed in breaches, showing when and how the compromise occurred.
• Email Threat Simulator – Tests email security by simulating real attacks to uncover weaknesses in platforms like Office 365 and Google Workspace.
• AI Phishing Simulators – Uses AI-powered phishing tests to boost reporting rates by up to 92% and reduce social engineering risks.
• Adaptive Security Awareness Training – Reduces high-risk behaviors by up to 90%, tailoring training to individual risk levels for maximum impact.
• Threat Sharing – Enables organizations to collaborate on emerging threats, automate intelligence sharing, and strengthen collective defenses.

Strengthening Cyber Resilience with Security Awareness

Security awareness is no longer optional—it’s a critical defense that works hand in hand with cyber insurance. By training employees, simulating threats, and strengthening security measures, businesses can reduce risks, lower premiums, and meet insurer requirements.

As cyber threats continue to evolve, organizations must focus on both prevention and recovery to stay resilient.

Check out Keepnet’s Human Risk Management Platform to build a security-first culture and align with cyber insurance best practices.