How Cyber Insurance Forces Tough Calls on Vendor Relationships

Securing cyber insurance often comes with a tough choice: Stick with a trusted IT vendor or switch to a pre-approved provider favored by the insurer. For many companies, particularly small and mid-sized businesses, these longstanding vendor relationships run deep, built on responsiveness and institutional knowledge. However, retaining such providers—if they’re not on the insurer’s list—can raise premiums significantly, or worse, be excluded from coverage altogether.

The friction stems from insurers’ limited ability to assess vendor-specific risk. While they rely on scoring tools and broad questionnaires, companies can improve their chances of keeping preferred partners by proactively demonstrating the vendor’s security posture, certifications, and incident response capability. Third-party validation and open communication can tip the scale in favor of continuity over convenience.

Beyond individual vendors, this negotiation reveals the tangled complexity of today’s vendor ecosystems. With more external providers connecting to core systems, the attack surface grows—and so does regulatory scrutiny. The rise in cyberattacks and expanding liability for CISOs and boards makes it clear: Cyber insurance isn’t a shield, it’s a last line of defense. Prevention still hinges on thorough vendor risk management.

To truly mitigate risk, organizations must stratify vendors by impact level, craft airtight contracts, run regular tabletop exercises, and ensure vendor collaboration during real incidents. Only then can they protect their operations without compromising on either risk or relationships—while still keeping insurers on board.