With ransomware attacks surging and 2024 on track to be one of the worst years on record, U.S. officials are seeking ways to counter the threat, in some cases, urging a new approach to ransom payments.

Ann Neuberger, U.S. deputy national security adviser for cyber and emerging technologies, wrote in a recent Financial Times opinion piece, that insurance policies — especially those covering ransomware payment reimbursements — are fueling the very same criminal ecosystems they seek to mitigate. “This is a troubling practice that must end,” she wrote, advocating for stricter cybersecurity requirements as a condition for coverage to discourage ransom payments.

Zeroing in on cyber insurance as a key area for reform comes as the U.S. government scrambles to find ways to disrupt ransomware networks. According to the latest report by the Office of the Director of National Intelligence, by mid-2024 more than 2,300 incidents already had been recorded — nearly half targeting U.S. organizations — suggesting that 2024 could exceed the 4,506 attacks recorded globally in 2023.

Yet even as policymakers scrutinize insurance practices and explore broader measures to disrupt ransomware operations, businesses are still left to grapple with the immediate question when they are under attack: Pay the ransom and potentially incentivize future attacks or refuse and risk further damage.

For many organizations, deciding whether to pay a ransom is a difficult and urgent decision. “In 2024, I attended a briefing by the FBI where they continued to advise against paying a ransom,” said Paul Underwood, vice president of security at IT services company Neovera. “However, after making that statement, they said that they understand that it’s a business decision and that when companies make that decision, it is taking into account many more factors than just ethics and good business practices. Even the FBI understood that businesses need to do whatever it takes to get back to operations,” Underwood said.

The FBI declined to comment.

“There’s no black or white here,” said cybersecurity expert Bryan Hornung, CEO of Xact IT Solutions. “There’s so many things that go into play when it comes to making the decision on whether you’re even going to entertain paying the ransom,” he said.

The urgency to restore operations can push businesses into making decisions they may not be prepared for, as does the fear of increasing damage. “The longer something goes on, the bigger the blast radius,” Hornung said. “I’ve been in rooms with CEOs who swore they’d never pay, only to reverse course when faced with prolonged downtime.”  

In addition to operational downtime, the potential exposure of sensitive data — especially if it involves customers, employees, or partners — creates heightened fear and urgency. Organizations not only face the possibility of immediate reputational damage but also class-action lawsuits from affected individuals, with the cost of litigation and settlements in some cases far outweighing the ransom demand, and driving companies to pay just to contain the fallout.

“There are lawyers out there who know how to put together class-action lawsuits based on what’s on the dark web,” Hornung said. “They have teams that find information that’s been leaked — driver’s licenses, Social Security numbers, health information — and they contact these people and tell them it’s out there. Next thing you know, you’re defending a multimillion-dollar class-action lawsuit.”  

Ransom demands, data leaks, and legal settlements

A notable example is Lehigh Valley Health Network. In 2023, the Pennsylvania-based hospital refused to pay the $5 million ransom to the ALPHV/BlackCat gang, leading to a data leak affecting 134,000 patients on the dark web, including nude photos of about 600 breast cancer patients. The fallout was severe, resulting in a class-action lawsuit, which claimed that “while LVHN is publicly patting itself on the back for standing up to these hackers and refusing to meet their ransom demands, they are consciously and internationally ignoring the real victims.”

LVHN agreed to settle the case for $65 million.

Similarly, background-check giant National Public Data is facing multiple class-action lawsuits, along with more than 20 states levying civil rights violations and possible fines by the Federal Trade Commission, after a hacker posted NPD’s database of 2.7 billion records on the dark web in April. The data included 272 million Social Security numbers, as well as full names, addresses, phone numbers and other personal data of both living and deceased individuals. The hacker group allegedly demanded a ransom to return the stolen data, though it remains unclear whether NPD paid it.

What is clear, though, is that the NPD did not immediately report the incident. Consequently, its slow and incomplete response — especially its failure to provide identity theft protection to victims — resulted in a number of legal issues, leading its parent company, Jerico Pictures, to file for Chapter 11 on Oct. 2.

NPD did not to respond to requests for comment.

Darren Williams, founder of BlackFog, a cybersecurity firm that specializes in ransomware prevention and cyber warfare, is firmly against paying ransoms. In his view, paying encourages more attacks, and once sensitive data has been exfiltrated, “it is gone forever,” he said.

Even when companies choose to pay, there’s no certainty the data will remain secure. UnitedHealth Group experienced this firsthand after its subsidiary, Change Healthcare, was hit by the ALPHV/BlackCat ransom group in April 2023. Despite paying the $22 million ransom to prevent a data leak and quickly restore operations, a second hacker group, RansomHub, angry that ALPHV/BlackCat failed to distribute the ransom to its affiliates, accessed the stolen data and demanded an additional ransom payment from Change Healthcare. While Change Healthcare hasn’t reported if it paid, the fact that the stolen data was eventually leaked on the dark web indicates their demands most likely were not met.

The fear that a ransom payment may fund hostile organizations or even violate sanctions, given the links between many cybercriminals and geopolitical enemies of the U.S., makes the decision even more precarious. For example, according to a Comparitech Ransomware Roundup, when LoanDepot was attacked by the ALPHV/BlackCat group in January, the company refused to pay the $6 million ransom demand, opting instead to pay the projected $12 million to $17 million in recovery costs. The choice was primarily motivated by concerns about funding criminal groups with potential geopolitical ties. The attack affected around 17 million customers, leaving them unable to access their accounts or make payments, and in the end, customers still filed class-action lawsuits against LoanDepot, alleging negligence and breach of contract.

Regulatory scrutiny adds another layer of complexity to the decision-making process, according to Richard Caralli, a cybersecurity expert at Axio.

On the one hand, recently implemented SEC reporting requirements, which mandate disclosures about cyber incidents of material importance, as well as ransom payments and recovery efforts, may make companies less likely to pay because they fear legal action, reputational damage, or shareholder backlash. On the other hand, some companies may still opt to pay to prioritize a quick recovery, even if it means facing those consequences later.

“The SEC reporting requirements have certainly had an effect on the way in which organizations address ransomware,” Caralli said. “Being subjected to the consequences of ransomware alone is tricky to navigate with customers, business partners, and other stakeholders, as organizations must expose their weaknesses and lack of preparedness.” 

With the passage of the Cyber Incident Reporting for Critical Infrastructure Act, set to go into effect around October 2025, many non-SEC regulated organizations will soon face similar pressures. Under this ruling, companies in critical infrastructure sectors — which are often small and mid-sized entities — will be obligated to disclose any ransomware payments, further intensifying the challenges of handling these attacks.

Cybercriminals changing nature of data attack

As fast as cyber defenses improve, cybercriminals are even quicker to adapt.

“Training, awareness, defensive techniques, and not paying all contribute to the reduction of attacks. However, it is very likely that more sophisticated hackers will find other ways to disrupt businesses,” Underwood said.

A recent report from cyber extortion specialist Coveware highlights a significant shift in ransomware patterns.

While not an entirely new tactic, hackers are increasingly relying on data exfiltration-only attacks. That means sensitive information is stolen but not encrypted, meaning victims can still access their systems. It’s a response to the fact that companies have improved their backup capabilities and become better prepared to recover from encryption-based ransomware. The ransom is demanded not for recovering encrypted files but to prevent the stolen data from being released publicly or sold on the dark web.

New attacks by lone wolf actors and nascent criminal groups have emerged following the collapse of ALPHV/BlackCat and Lockbit, according to Coveware. These two ransomware gangs were among the most prolific, with LockBit believed to have been responsible for nearly 2,300 attacks and ALPHV/BlackCat over 1,000, 75% of which were in the U.S.

BlackCat executed a planned exit after pilfering the ransom owed to its affiliates in the Change Healthcare attack. Lockbit was taken down after an international law-enforcement operation seized its platforms, hacking tools, cryptocurrency accounts, and source codes. However, even though these operations have been disrupted, ransomware infrastructures are quickly rebuilt and rebranded under new names.

“Ransomware has one of the lowest barriers to entry for any type of crime,” said BlackFog’s Williams. “Other forms of crime carry significant risks, such as jail time and death. Now, with the ability to shop on the dark web and leverage the tools of some of the most successful gangs for a small fee, the risk-to-reward ratio is quite high.”

Making ransom a last resort

One point on which cybersecurity experts universally agree is that prevention is the ultimate solution.

As a benchmark, Hornung recommends businesses allocate between one percent and three percent of their top-line revenue toward cybersecurity, with sectors like health care and financial services, which handle highly sensitive data, at the higher end of this range. “If not, you’re going to be in trouble,” he said. “Until we can get businesses to do the right things to protect, detect, and respond to these events, companies are going to get hacked and we’re going to have to deal with this challenge.”

Additionally, proactive measures such as endpoint detection — a type of “security guard” on your computer that constantly looks for signs of unusual or suspicious activity and alerts you — or response and ransomware rollback, a backup feature that kicks in and will undo damage and get you your files back if a hacker locks you out of your system, can minimize damage when an attack occurs, Underwood said.

A well-developed plan can help ensure that paying the ransom is a last resort, not the first option.

“Organizations tend to panic and have knee-jerk reactions to ransomware intrusions,” Caralli said. To avoid this, he stresses the importance of developing an incident response plan that outlines specific actions to take during a ransomware attack, including countermeasures such as reliable data backups and regular drills to ensure that recovery processes work in real-world scenarios.

Hornung says ransomware attacks — and the pressure to pay — will remain high. “Prevention is always cheaper than the cure,” he said, “but businesses are asleep at the wheel.”

The risk is not limited to large enterprises. “We work with a lot of small- and medium-sized businesses, and I say to them, ‘You’re not too small to be hacked. You’re just too small to be in the news.'”

If no organization paid the ransom, the financial benefit of ransomware attacks would be diminished, Underwood said. But he added that it wouldn’t stop hackers.

“It is probably safe to say that more organizations that do not pay would also cause attackers to stop trying or perhaps try other methods, such as stealing the data, searching for valuable assets, and selling it to interested parties,” he said. “A frustrated hacker may give up, or they will try alternative methods. They are, for the most part, on the offensive.”