Why Managed IT Service Providers Need Cybersecurity Insurance
As a managed IT service provider (MSP), you specialize in offering clients top-notch IT services. When it comes to safeguarding your online security and that of your clients, you leave no stone unturned. You've stepped up your systems' security with foolproof measures to prevent even the most sophisticated cyber-attack. Firewalls, antivirus software, regular system audits are just a few measures that you have implemented to ensure your systems are safe round the clock.
If that hits closer home, you may be wondering if your MSP still needs cybersecurity insurance. Well, the truth is, every business with an online presence is faced with some level of risk. Implementing cybersecurity best practices may go a long way in keeping your MSP and clients from trouble, but there's always a degree of risk looming.
For instance, a rogue employee may compromise the system's security and expose protected customer information. In such a case, you'll be forced to face the consequences, which may involve, among other things, monetary losses. As such, MSPs need to take a cybersecurity insurance cover to safeguard themselves from risks.
What Do Experts Have to Say About Cybersecurity?
Recently, I spoke with Joseph Brunsman of CPL Brokers on the subject of cybersecurity insurance. As an insurance professional with a solid IT background, he had much to say. Brunsman noted that unlike traditional insurance lines (homeowner's, auto, etc.), which have established case law, cybersecurity insurance supports a highly volatile field where there's always a new attack in the offing.
As much as tech companies have the machinery to monitor system security, some of the threats end up bypassing the checks, thereby hurting businesses. He maintains that the safest way to protect businesses from cyber threats is by getting a cybersecurity insurance policy as a backup when the safeguards fail.
Unfortunately, many MSPs have continued overestimating their prowess in safeguarding their businesses and their clients' from system security breaches. A big chunk of MSPs have continued running businesses without contracts, a situation that exposes them to legal liability, even in incidences where a cybercrime may be due to the client's negligence.
Brunsman advises that with the rising cybercrime rate, it's essential for MSPs to give their clients a comprehensive contract outlining the services they're offering them and all the additional services that the firm covers. This way, if a client gets a cyberattack related to the services not taken up, the MSP will be exempted from liability.
Another way your MSP can minimize liability is by issuing regular newsletters to clients, drawing their attention to potential risks, and advising on the proper security measures to implement to safeguard their systems. This also ensures you have a better defense in the event of a suit related to areas you have already cautioned the client against.
Importance of Due Diligence
Despite their sophisticated system security, MSPs handle large volumes of sensitive information, like credit card information, HIPAA-protected information, etc., thus will continue being a target for cyber attacks. It's therefore paramount to ensure MSP and their clients exercise due diligence to minimize security errors.
Primarily, insurance companies will determine the policy amount based on your revenue. But other factors may play at minimizing your premiums. Demonstrating a high level of due diligence is one such way that can secure you a low premium. For instance, keeping the firewalls and antivirus protection updated, having a secure backup, performing regular system audits are all measures that show the insurer you're a low-risk firm.
Nonetheless, even if you've taken a comprehensive cybersecurity policy, it's essential to maintain tight security around your systems round the clock. A security breach on your system not only comprises your clients' data but it has a severe implication on your reputation. While some businesses recover following a major system breach, others suffer a great deal of reputation damage and end up going under. Even if you manage to recover, it may damage your relationship with the affected clients permanently, which translates to a revenue loss.
What Does a Cybersecurity Insurance Policy Cover?
Maybe you have been running with a general liability insurance cover. Even though the policy may cover some losses resulting from cybersecurity, it does not provide sufficient protection against the broad spectrum of cybercrimes. Getting a cybersecurity policy offers comprehensive coverage against your privacy and data threat from; malware, human threats (malicious employees and staff mistakes), data breaches, sophisticated hackers, etc.
However, ensure you read the policy thoroughly to learn about exclusions. This prepares you against future surprises and keeps you on guard against lapses that may violate the policy. For instance, assuming you fail to update, say, antivirus software and a hacker installs malware, gaining access to customer data, would the insurance company compensate you?
On the same note, talk to the agent about related risks that are not covered under the cybersecurity policy, which can be included in the general liability cover. But essentially, a cybersecurity insurance compensation will cater for costs involving;
- Client notification expenses
- Cost of restoring breached systems
- Attorney and court fees
- Compliance bodies fines
- Every business in cyberspace needs a cybersecurity insurance policy, no matter how sophisticated their systems are. Do not overestimate the strength of your system against cyber attacks. Everyone is vulnerable.
- Implementing best cybersecurity practices goes a long way in safeguarding a business against attacks, but it does not eliminate the risk entirely.
- Robust security safeguards should be backed up by a cybersecurity insurance policy to minimizes losses after an attack.
- A comprehensive contract highlighting additional services on offer, and regular client newsletters with tips on tightening security, can safeguard your MSP from client negligence.
- Exercising due diligence, like regular system audit and keeping security software up to date, can minimize security errors, leading to discounted insurance premiums.
- Cybersecurity insurance safeguards you from crimes resulting from data breaches, staff mistakes and malicious activities, malware, sophisticated attackers, etc.
- You should read the policy, noting exclusions to prepare for other risks associated with cybersecurity and avoid lapses that may violate the policy.
Are you on top of your cybersecurity management? Do you have a dedicated MSP marketing firm implementing your online strategies? Ulistic is here to take care of these and all your digital marketing needs. Talk to us today, and let us walk the journey together.
Discover more about cybersecurity insurance from CPL Brokers.