Why MSPs Need Cyber Liability Insurance
Yes. Insurance is crucial and a priority for most organizations globally. Managed Service Provider companies are usually Information Technology (IT) companies. Thus it is very reasonable to have cyber liability insurance. Moreover, many Insurance companies currently mandate their clients to get some form of cyber insurance.
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Insurance Policies Your MSP Needs
1. General Insurance Policies
The general policies offer insurance for auto, buildings, health, and more. These types of insurance will help the MSP to protect non-IT assets.
2. Cyber Liability Insurance
The insurance firms insist that organizations have cyber liability insurance at the management level and individual representative level. Previously, MSPs focused only on cyber insurance for the management level.
However, the individual representatives of MSPs usually talk with the organization's clients. Thus an organization needs to create a win-win situation with the representatives and insurance brokerage to increase leads steadily.
Do MSPs Need Cyber Liability Insurance?
There are two main reasons why a business will require cyber liability insurance. They include:
1. Transfer of Risk
The main reason why any company needs cyber insurance is to cover for risks that could happen. MSPs and other tech businesses face various cyber risks. Some of the dangers include malware, data breaches, rogue employees, staff mistakes, and more. The world often hears about incidents of viruses, hacks, and malware. It is important to transfer this risk to avoid incurring costs.
2. Save on costs
Cost is another major reason why MSPs need cyber insurance. The average cost of cybercrime in the United States in 2018 was $27.37 million. However, in the same year, the global value of the cyber insurance market was $5.5 million. The number of organizations that had cyber insurance was encouraging in 2018. 64% of large entities in the United States had cyber insurance. It is worth noting that 43% of cyber attacks target small and medium businesses in the US.
Be Wary; Cyber Liability Insurance Is Unique
Cyber insurance is not like other insurance policies, such as auto insurance. It can be freewheeling and unregulated. Thus MSP companies and other buyers need to be very vigilant about the plans they purchase. It would be best if you were very keen on the details of the errors and omissions of this policy. For example, there are insurance providers who cover rogue companies while some don't. Some will provide compensation regardless of whether you had back up.
Others will want you to have back up to make an insurance claim. The list of addons and exclusions is quite long, and you need an expert insurance officer to explain the policy.
Factors You Need to Consider Before You Partner With Cyber Liability Insurance Firms
1. Coverage for Loss of Client Data
Watch out for exclusions for a negligent act or network security breach that leads to data corruption, alteration, loss, deletion, destruction, and more. Loss of client data is also possible through omission or failure to deliver technology or professional services. Ask the insurance provider on their exclusions and addons for loss of data.
Loss of data or a data breach is quite costly. There have been 1.4 billion data breaches in the United States alone in 2019. One hundred sixty-four million records were exposed in the same year. In 2019, the average cost of a data breach to U.S companies was $8.19 million. The cost of loss of data has been on a constant rise. In 2018, it was $7.91 million.
2. Rogue Employee Policy
Employees can get MSPs in trouble. You have little or no control over the actions of people. Some employees who leak data to hackers are compelled by their own greedy motives while others go rogue under duress. A partnership with an insurance firm will help to cover this liability.
3. Full-First and Third Party Policies
An MSP company needs a full cyber insurance policy. It should cover areas like cyber extortion, network security liability, legal and forensic expense, privacy liability, media liability, damage cost for data or programs, and more.
4. The Addons and Exclusions
What exclusions does the insurance company have? Are you covered if you fail to do updates? Will the insurance company cover you if you fail to backup data?
5. Third-party Vendors Protection
Insurance vendors and MSPs are targets of hacks. MSPs need to confirm if the insurance firm will cover a breach of data they provide to the insurance vendor.
Yes, MSPs should partner with insurance firms to get a custom and appropriate policy for their services and assets. The two main reasons why MSPs and insurance firms should partner is for the transfer of cyber risk and to save on costs. Ensure the cyber insurance vendor is well informed to help you go into details on what they offer. Be thorough with the addons, errors, and exclusions.
The factors an MSP should consider before they partner with an insurance provider include coverage for loss of data, Rogue employee policy, full-first and third party policies, addons and exclusions, and protection of third party insurance vendors. You should also partner up with a digital marketing firm to help you generate more leads.
Ulistic will help your business to realize online marketing opportunities and help your organization to meet its goals. We are a team of growth and marketing experts that will help you identify your prospects and grow. Contact Ulistic now to know more about our business development, sales, and marketing services for IT managed service providers.