Insurance is a risk transfer mechanism; in the context of cyber insurance it has also been studied as a potential incentive mechanism for improving the state of cyber-security. However, in the absence of regulation or mandate, the introduction of insurance deteriorates network security because the insured agents simply use it for risk transfer. We consider the use of pre-screening to enable premium discounts to higher effort agents, and show that with interdependent agents, the incentivized improvement in efforts can compensate for the effort reduction resulting from risk transfer, thus improving the state of network security over the no-insurance scenario; at the same it also increases the insurer's profit without the need to regulate the market or compulsory participation.