The managed services industry is at the heart of the modern economy, giving businesses the tools they need to operate securely and efficiently. But with this central role comes complex and ever-evolving risks.
What happens if a client’s network is breached due to a vulnerability in your systems? What if a data backup fails and causes a massive business interruption for a client? These are the kinds of risks that can lead to costly legal battles, damage your reputation, and threaten your company’s future.
We offer specialized insurance designed for managed service providers. Our coverage is built to protect you from the unique liabilities of this industry. With the right protection, you can focus on building and scaling your services with confidence.
Since the 1990s, managed service provider (MSP) companies have been the backbone for businesses, helping them monitor and manage their IT infrastructure. Over the years, MSPs have dramatically expanded their service offerings. Today, they handle everything from cloud services and data backup to much of the time-consuming and repetitive tasks involved in managing complex IT environments.
Companies of all sizes now rely on MSPs to navigate the evolving cybersecurity landscape. This reliance, however, puts immense pressure on MSPs to deliver near-flawless security. The global managed services market was valued at over $299 billion in 2023 and is projected to continue its rapid growth. With this opportunity, however, come significant vulnerabilities. Cybersecurity threats are at an all-time high, with the cost of cybercrime projected to reach a staggering $10.5 trillion by 2025. This escalating threat landscape, along with a talent shortage in the cybersecurity field, means MSPs are facing more risks now than ever before.
Why is Insurance for MSP Companies Important?
MSP companies can use insurance to protect themselves from various risks, streamline their operations, and build credibility within the industry.
Expansion
A staggering 74% of CEOs are “extremely concerned” about their organization’s ability to withstand a cyberattack. Rather than shouldering this burden themselves, they are increasingly turning to MSPs. This allows CEOs to delegate complex IT and security challenges, freeing them up to focus on strategic growth, business operations, and core corporate responsibilities.
Cybersecurity
Cybersecurity has become a primary concern for businesses, ranking with economic and operational challenges. As cyberattacks escalate, MSPs are on the front lines, navigating this volatile landscape to protect their clients. The managed services market continues to grow, but the projected $10 trillion annual cost of cybercrime by 2025 places immense pressure on MSPs to deliver flawless security and resilience.
Remote Work
IT specialists worked 24/7 during the stay-at-home orders in 2020. Many US employees enjoyed the flexible work schedule. As a result, various companies have adopted hybrid work arrangements, making MSPs (i.e., tech support) even more needed now than ever.
Regulatory Compliance
As MSPs handle sensitive client data, they are increasingly held responsible for compliance with data privacy laws like GDPR and CCPA. A single, unintentional failure can lead to severe penalties. The right insurance helps protect your business from the significant costs of non-compliance and legal defense, so you can confidently serve clients across regulated industries.
MSP Insurance Coverage & Policies
These coverages form the foundation of any risk management program for MSP companies:
The potential of a customer being injured while operating a scooter or bike is the biggest risk facing the micromobility space. In addition to the need to insure yourself against this risk, it’s crucial to know that this coverage will be required in at least $1M per occurrence and $2M in the aggregate in every city you wish to operate. Most cities will actually require more.
When employees sustain work-related injuries, employers are typically responsible for their medical costs and lost wages. This policy covers these expenses, protecting employees while keeping companies running smoothly.
Whether it’s a devastating fire, natural disaster, or burglary, property insurance responds. This policy reimburses companies for direct property losses, supporting recovery and momentum.
Any company with employees faces the risks of allegations, such as discrimination, wrongful termination, breach of contract, etc. This coverage protects companies against lawsuits related to employment practices.
Errors and omission (E&O) insurance, also known as professional liability, covers companies in third-party or client lawsuits claiming substandard work or service. Work errors or oversights, missed deadlines, budget overruns, etc., often result in costly cases—but E&O insurance responds to these mishaps.
Technology drives most company’s success in the modern world. If a tech issue arises, such as a newer software causing a third party’s older system to crash, liability becomes a massive problem. Tech E&O, usually teamed with cyber liability, covers legal fees and other related costs in the event of a lawsuit.
Cyber insurance protects companies from third-party lawsuits relating to electric activities (i.e., phishing scams). Plus, it offers many recovery benefits, supporting data restoration and reimbursement for income lost and payroll spent.
The cost of insurance for your managed service provider (MSP) company isn’t one-size-fits-all. It’s a highly variable number based on several key factors unique to your business and the services you provide.
Here’s what an insurer will typically consider when calculating your premium:
Your Company’s Size and Scope: The number of clients you serve, your total revenue, and the size of your team all play a major role. An MSP serving hundreds of small businesses has a different risk profile and cost than a firm managing IT for a single, large enterprise.
Cybersecurity and Risk Management: Insurers will thoroughly evaluate your security protocols. This includes the strength of your internal cybersecurity, your client onboarding processes, and your incident response plan. Demonstrating robust security measures can often lead to a lower premium.
Policy Structure: The amount of risk your company is willing to assume will directly impact the final cost. For instance, opting for a higher deductible means you’ll pay more out-of-pocket for a claim, which typically results in a lower annual premium.
Claims History: Your company’s past will heavily influence its future rates. A history of frequent or costly claims, such as client data breaches or service failures, will likely result in a higher premium, while a clean record can help keep your costs down.
MSP Claims & Examples
Navigating a commercial insurance claim is often challenging, often fraught with confusion and multiple unknown factors. The following four-part series outlines the ins and outs of commercial insurance claims:
Beyond insurable events, MSPs must actively manage a range of operational and strategic risks. This includes establishing and maintaining strong internal security protocols to prevent breaches that could impact multiple clients. MSPs should also have clearly defined service level agreements (SLAs) and detailed contracts to manage client expectations and define the scope of their responsibility. Building a robust incident response plan is another crucial, non-insurable risk management activity that ensures the company can act quickly and effectively when a security event or service outage occurs.
Insurers view robust risk management as a primary factor in setting premiums. An MSP can significantly lower its costs by demonstrating strong internal controls. This includes implementing a comprehensive cybersecurity framework, such as multifactor authentication for all employees and clients, regular security audits, and a proven track record of patching and updating client systems promptly. By providing evidence of these proactive measures, an MSP shows that it is a lower risk, which can lead to more favorable terms and lower premiums on their policies.
An MSP should integrate risk management and insurance planning from its very first day of operation. Even a single-person startup faces significant liability from professional errors, data breaches, and client property damage. Securing a foundational policy like Errors & Omissions (E&O) and Cyber Liability is a critical step before signing the first client contract. As the business grows, it should regularly reassess its risk profile and expand its coverage to match its increasing scale and the complexity of its services.
MSP Insurance Insights
ARTICLES
Top 5 Risks Consulting Firms Face
No matter if your business relies on a few chosen professionals or several thousand, all consulting firms face unique risks. Helping companies thrive and improve...
Meet Priori Legal: Connecting Startups to Trusted Lawyers
We’re all about teaming up with great startups on a mission to help the startup community excel. Priori Legal is one of those awesome companies. This guest post...
Finding MSP insurance coverage doesn’t have to be painful. We aim to make the purchasing experience as streamlined and intuitive as possible.
1
Get a quote
Use our custom-built digital platform to get quotes fast. We automate clerical tasks that plague traditional insurance brokerages, giving us more time to be responsive and alert to your company’s needs.
2
Pair with a specialist
No two organizations are the same. Our team of coverage experts partners with your team to engineer your risk management strategy, together. We take the time to understand the intricacies of your company to get you the best possible coverage.
3
Stay one step ahead
To do better, you need to know better. With changing political, technological, legal, and economic landscapes, staying ahead of the curve is critical.
Our in-house team is tapped into the latest developments in your industry, proactively ensuring you’re covered.
Schedule Time with an MSP Expert
Risk Calibration
Let’s figure out if you’re under- or over-insured and whether your current policies have detrimental gaps.
Identify Cost Savings
We’ll compare your current policies with our extensive benchmarking database to see if your risk and costs have kept pace.
Risk Calibration
Walk away with a detailed plan to manage risk as your company scales — no strings attached.
Why Choose Founder Shield?
Founder Shield is a leading insurance provider that specializes in offering comprehensive coverage for high-growth companies, offering numerous benefits and advantages over traditional insurance providers. Here’s a breakdown of some of the key features and benefits that you’ll enjoy with us:
Benefits of Choosing Founder Shield
Industry Expertise
Founder Shield is focused on protecting rapidly evolving MSP startups. We ensure that our products are tailored to meet the unique needs of MSP companies.
Customized Solutions
Founder Shield offers bespoke insurance policies that are designed specifically for each client’s needs, ensuring comprehensive coverage that addresses the unique risks associated with MSP operations.
Fast Quotes
With Founder Shield’s streamlined quoting process, you can receive a personalized quote for your MSP insurance quickly, allowing you to make informed decisions fast.
Ease of Use
Founder Shield’s user-friendly digital platform makes it easy to manage your insurance policies, submit claims, and access important documents whenever you need them.
Dedicated Support
Founder Shield provides exceptional customer service, with dedicated account managers who are always available to assist you with any questions or concerns you may have about your insurance coverage.
Scalable Coverage
As your business grows, Founder Shield’s insurance policies can grow with you, ensuring you always have the right level of coverage for your changing needs.
Founder Shield is a preferred choice for MSP businesses because of our specialization in the industry. We offer flexible and customized insurance policies, a speedy quoting process, and exceptional customer service with dedicated account managers.
Great service – proactive, responsive, go beyond what I have expected from previous providers. The team do a wonderful job