Case Study: Closing the Cyber Insurance Gap

Executive Summary

Cyber insurance has become a standard line item in small and mid-sized business budgets across the Midwest. But having a policy and having the right policy are two very different things. Many organizations in Wisconsin, Minnesota, and Iowa are carrying coverage limits that no longer reflect the actual cost of a cyber incident.

This case study examines how that gap develops, what it costs when left unaddressed, and which factors SMBs should evaluate to align their coverage with real operational risk.

Customer Overview

Industry: Manufacturing

Location: Midwest

Size: 55 Employees

Challenge

The client, a Midwest-based manufacturing company with 55 employees, had maintained a cyber insurance policy for three years. The coverage was originally purchased based on general guidance from their broker and has not been reviewed since. When a ransomware event forced a three-day shutdown of production systems, the financial impact exceeded their policy limit by a significant margin.

The shortfall was not the result of poor intentions. The organization had simply never been walked through a structured process to evaluate whether its coverage matched its actual exposure. The incident revealed several gaps that had developed over time:

• Coverage limits that reflected hardware replacement costs but not business interruption losses
• No clear understanding of how long recovery would take or what it would cost
• Third-party vendor relationships that created notification and liability obligations not covered under their policy
• No internal documentation supporting the claim, which complicated and delayed the reimbursement process

Key Risks Identified

A structured Business Impact Analysis conducted during onboarding identified four primary risk factors not reflected in the existing insurance posture.

1.        Underestimated Business Interruption Costs – For a manufacturing operation, downtime is not measured in inconvenience. It is measured in lost production, delayed orders, contract penalties, and employee overhead with no corresponding output. These costs accumulate quickly and often exceed the cost of the technical recovery itself. Many SMB policies are sized around data recovery and notification costs, without accounting for the operational shutdown that typically accompanies a serious incident.

2.       Third-Party Liability Exposure – Manufacturing companies frequently exchange data with customers, suppliers, and logistics partners. A breach that exposes customer order data or proprietary specifications can create liability that extends to those relationships. If the policy limit is reached and covers the organization’s own recovery costs, there is nothing left to address third-party claims.

3.       Regulatory and Notification Obligations – Wisconsin, Minnesota, and Iowa each have data breach notification requirements. Depending on the nature of the data involved, notification obligations may include customer communication, regulatory filings, and, in some cases, credit monitoring services. These costs are real and often underestimated in policies designed for smaller incidents.

4.       Insufficient Security Controls Affecting Coverage – Several insurers reduced or denied claims because documented security controls were absent at the time of the incident. Multi-factor authentication, endpoint protection, and tested backup procedures are increasingly conditions of coverage, not merely best practices. A policy is only as good as the controls it assumes are in place.

SST Approach

SST worked with the client to build a clear picture of their cyber risk exposure and connected them with a trusted cyber insurance partner to ensure their coverage posture aligned with that risk. Our role was to equip the client with the information and documentation needed for productive, informed coverage discussions.

• Financial Risk Visibility – Using revenue-per-hour modeling and operational dependency mapping, SST helped the client calculate the actual cost of a multi-day outage. This included lost production, fixed labor costs during downtime, expedited shipping to recover delayed orders, and customer communication costs. When this figure was compared to their policy limit, the gap became both undeniable and actionable.
• Preparing for the Insurance Conversation – SST worked with the client to document and strengthen the security controls that underwriters assess when pricing cyber risk. This positioned the client to engage productively with their insurance partner and to understand what their organization needed to demonstrate to obtain favorable terms. Key factors included:
  • Presence and enforcement of multi-factor authentication across critical systems
  • Endpoint detection and response capabilities
  • Tested and documented backup and recovery procedures
  • Defined incident response roles and documented response plans
  • Employee security awareness training frequency and completion rates
  • Third-party vendor access controls and agreements
• Risk Visibility for Coverage Discussions – Rather than leaving the client to rely solely on general guidance from a broker, SST provided the financial context that made coverage discussions meaningful. Working alongside their insurance partner, the client was able to approach coverage decisions with a clear picture of their actual risk exposure. The key inputs to that conversation included:
  • Total revenue at risk during a realistic outage window
  • Estimated recovery costs for systems, data, and third-party forensics
  • Notification and legal obligations based on the types of data handled
  • Third-party liability based on the nature of customer and vendor relationships
  • Regulatory exposure based on applicable state requirements
• Quarterly Business Reviews (QBRs) – Ongoing QBRs were used to track changes in operations, technology, and vendor relationships that could affect coverage adequacy. Insurance decisions are not one-time events. They require periodic reassessment as the business grows and the threat environment evolves.

Results

By working through a structured risk and coverage assessment, the client was able to make informed decisions about their insurance posture and the operational controls that support it.

• Identified a meaningful gap between existing coverage and actual incident cost exposure
• Documented security controls that supported a productive conversation with their broker and insurer
• Developed a clearer understanding of the factors that drive coverage decisions and premiums
• Increased leadership confidence in understanding what they are covered for and where residual risk remains

Key Takeaways

Cyber insurance is a risk transfer tool. Like any tool, it only works when it is properly matched to the job.

SMBs across Wisconsin, Minnesota, and Iowa should regularly evaluate whether their coverage reflects:

• Current revenue and the cost of business interruption at realistic outage durations
• Recovery costs for the systems and data the organization actually relies on
• Third-party exposure from customer, supplier, and vendor data relationships
• State-level notification and compliance obligations
• The security controls that insurers expect to find in place

Having a cyber insurance policy is a necessary first step. Understanding whether that policy is sized and structured to match your actual risk is what turns it into meaningful financial protection.

How SST Helps

Secure Strategic Technology helps organizations understand their cyber risk in financial terms before an incident forces them to confront it. Through structured Business Impact Analysis, security control assessments, and ongoing advisory services, SST provides customers with the information and documentation needed to work effectively with their cyber insurance partner.

By linking operational risk to financial exposure and maintaining continuous alignment through QBRs, SST ensures customers enter coverage conversations informed and prepared, rather than relying on assumptions.