Cyber Insurance Gaps Leave Mid-Market Healthcare Providers Exposed as Coverage Adoption Outpaces Understanding of Risk — DeshCap - June 2, 2026
Cyber insurance adoption is accelerating across the healthcare sector, but for many mid-market providers, coverage is being secured faster than the risks it is meant to address are fully understood.
That imbalance is leaving organizations exposed at the moment they expect protection, according to Fred Barnachawy, founder and managing director of DeshCap, who outlined the issue in a recent BizTechReports executive vidcast interview. He argues that while awareness of cyber threats has improved, many healthcare organizations are still making insurance decisions without a clear view of their underlying risk profile or how policies perform in practice.
Healthcare providers are under sustained pressure from ransomware attacks, data breaches, and operational disruptions. Mid-market organizations, in particular, face a difficult balance. They must protect sensitive patient data and maintain continuity of care, often without the dedicated risk and insurance teams that larger systems maintain. Many have turned to cyber insurance as a financial safeguard, but Barnachawy said the motivation is often compliance-driven rather than an analytical effort to ensure operational readiness.
“Some organizations procure cyber insurance just to check the box,” Barnachawy said. “They meet contractual or regulatory requirements, but they don’t necessarily align the policy with their actual operational risks.”
Coverage Outpaces Risk Understanding
The rapid expansion of healthcare cyber insurance has introduced a new layer of complexity into healthcare risk management. While executives are more engaged in discussions around cyber exposure, Barnachawy said their understanding of how risk translates into coverage remains limited.
“We’ve seen a higher level of awareness from management,” he said. “CFOs, COOs, and even clinical leadership are getting involved. But the understanding of how policies actually work is still very narrow.”
That narrow understanding is often reinforced by long-standing reliance on a single broker relationship. Mid-market healthcare providers frequently depend on brokers not only for access to insurance markets but also for guidance on policy structure. This can constrain independent evaluation.
“Most management teams focus on one broker relationship,” Barnachawy said. “They don’t typically have brokers compete, and that narrows their view of how cyber insurance is distributed and structured.”
By contrast, larger healthcare systems often employ in-house insurance specialists who can analyze policy language, model financial exposure, and negotiate terms. The absence of that capability in the mid-market contributes to a broader gap in risk literacy, where decisions are made without fully understanding how coverage aligns with real-world threats.
Policies Misaligned With Operations
The consequences of that gap become visible in how policies are implemented and maintained. Barnachawy said that few stakeholders involved in the insurance process engage deeply with policy wording or assess whether it reflects the organization’s actual operating environment.
“The wording is rarely read from an operational standpoint,” he said. “Not by management, not by brokers, and often not even by underwriters.”
This disconnect can lead to situations where organizations believe they are protected but fail to meet the conditions required for a claim to be paid. Technical controls, such as multifactor authentication, may be inconsistently applied or misaligned with policy requirements.
“You may think you’re covered, but if a control is missing or not implemented the way the policy expects, you may not get paid,” Barnachawy said.
He added that many organizations treat cyber insurance as a static purchase, revisiting it only at renewal. In practice, policies can be adjusted throughout the coverage period, allowing organizations to better align terms with evolving risks.
“Most management teams wait until renewal,” he said. “But policies can be updated during the term, and that’s an opportunity many organizations miss.”
Payouts Fall Short of Expectations
The gap between perceived and actual protection is most evident in financial outcomes. Barnachawy pointed to industry data suggesting that payouts on large cyber losses often fall significantly short of expectations.
“We estimate that the payout ratio on large losses is less than 25 percent,” he said. “An organization may expect a $10 million policy to cover a $10 million loss, but in reality, they may receive less than $2.5 million.”
That disparity reflects a combination of misaligned coverage, policy exclusions, and failure to meet technical requirements. It also underscores the fact that many healthcare organizations often transfer risk financially without fully understanding how that action is structured.
“Insurance contract breaches are among the most common types of disputes,” Barnachawy said. “This is at the root of many publicly available cases where insureds and insurers are in litigation over non-payment.”
Tools Underused For Risk Insight
As cyber risk grows in scale and complexity, technology is beginning to play a more central role in how organizations understand and manage insurance. Barnachawy pointed to the use of analytics and artificial intelligence as tools that can help bridge the gap between risk exposure and policy design.
“We are AI-assisted insurance engineers,” he said. “We encourage organizations to use AI tools to better understand their risks and the structure of their policies.”
He recommends that organizations begin with a structured but accessible approach, starting with the creation of a risk register. This process involves identifying key risks, ranking them by importance, and determining whether appropriate controls or insurance coverage are in place.
“Start with a risk register,” Barnachawy said. “Identify your top risks, rank them, and determine whether you have controls or insurance coverage in place.”
Even a basic exercise can shift how organizations think about insurance. Rather than focusing on policy limits or premiums alone, it encourages a closer examination of how coverage aligns with specific operational risks.
“It helps management move beyond just looking at the declarations page and start thinking about what is actually covered,” he said.
Barnachawy also emphasized that the insurance market itself is more flexible than many assume. With significant capital available across insurers, reinsurers, and capital markets, organizations have more room to negotiate terms than is commonly understood.
“There is a lot of capital in the marketplace,” he said. “If one insurer does not accept a structure, another one will.”
Conclusion: Adoption is Outpacing Risk Literacy
The expansion of cyber insurance in healthcare reflects a necessary response to growing digital risk, but Barnachawy’s analysis suggests that adoption alone does not equate to protection. Many mid-market providers are purchasing coverage before fully understanding the risks they face or the conditions required for that coverage to perform.
The result is a widening gap between expectation and outcome, where organizations believe they have transferred risk but remain financially exposed when incidents occur.
Closing that gap will require more than increased spending. It will depend on improving how risk is defined, measured, and aligned with insurance structures. Until that happens, coverage adoption is likely to continue outpacing understanding, leaving many organizations vulnerable despite their investment in protection.
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