Don't forget that there's lots of gray hat / black hat hackers out there as well, who will begin with an email similar to this, add a bitcoin address for the "bug bounty" in the next, and will end with escalating the price of the "bounty" for the "service" of deleting the data they harvested. It's hard even for tech-savvy managers to figure out which of these you're dealing with. Now put yourself into the shoes of the average insurance company middle manager.
For completeness, I don't think this company's behavior is excusable. I'm just saying that maybe also the security community should iterate a bit more on the nuances of the "standard practice" vulnerability reporting process, with the explicit goal of not freaking people out so bad.
The contractor (who was certainly incompetent) probably looked at a bunch of nightmarishly complex identity API's and said "F** it!", combine that with being grossly underpaid and you get stuff like this.
It's a bad situation, of course, and involving threatening lawyers makes it even more ugly. But I can understand how a very small business (knowing nothing about IT other that what their incompetent contractor told them) might get really offended and scared shitless by some rando giving them a 30-day deadline, reporting them to authorities, and demanding that they contact all affected customers.
But that is ok I think. They should get scared enough to not risk such a neglect again
You set a deadline after an initial conversation and urging them to fix it, if they don’t respond. I think the idea would be to escalate slowly. Like the original poster said large tech companies like know how to do this and streamlined the process. But, to someone not familiar with the process it looks like threats and deadlines imposed by a random person.
I am not defending the company just presenting their possible point of view. It’s worth seeing things with their eyes so to speak to try to understand their motivations.
It all depends on the goal. Is the goal for them to fix it most of all? To get them embarrassed? To make a blogpost and get internet points?