Since the 1990s, managed service provider (MSP) companies have served various businesses, helping them monitor and manage their servers and networks. MSPs have broadened their scope of services over the years. Nowadays, MSPs handle much of the time-consuming and repetitive tasks of managing IT infrastructure or user-end systems.
Companies of all sizes rely on MSPs for support as they navigate cybersecurity concerns. However, this reliance puts mounting pressure on MSPs to deliver near-flawless services. That said, roughly 64% of US businesses use some MSP. However, as the opportunities surface, MSPs also face plenty of new vulnerabilities. With cyberattacks increasing steadily — over 155.8 million individuals experienced data exposures in 2020 alone — MSPs face more risks now than ever.
Why is Insurance for MSP Companies Important?
As mentioned, businesses rely more on MSPs to help defend against cyberattacks nowadays. Additionally, MSP companies provide such a variety of services that the vulnerabilities run rampant. Of course, most companies purchase some foundational insurance, such as general liability. However, this exclusive coverage doesn’t cut it when MSPs deal with so many digital interfaces.
The IT environment is growing more complex by the minute, with sophisticated cybercriminals and potential technical issues surrounding remote work. Business digitization isn’t anything new, but it is evolving rapidly in the US, leaving MSPs more vulnerable to risks. Running a successful MSP company means protecting it with a robust risk management plan.
Roughly 70% of CEOs are “extremely concerned” with cyberattacks; however, they don’t want the weight of cybersecurity on their shoulders. Trusting an MSP to handle IT issues means CEOs can focus on internal roles and expansion.
Cybersecurity was the #2 top concern in 2020, right behind health and pandemic issues. With cyberattacks on the rise, this mindset will likely continue for years to come. MSPs must traverse the ever-changing IT landscape with cybersecurity in mind.
It’s no surprise that the average cost of a data breach is a whopping $4M in the US. With remote work on the rise, IT concerns are mounting and C-level executives depend on MSPs to keep systems and networks running smoothly.
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.
Recommended policies for MSP companies
These coverages form the foundation of any risk management program for MSP companies.
General liability offers broad protection against some of the most fundamental risks companies face. Known as “slip-and-fall” or “all-risk” insurance, this policy covers personal or property damage and bodily injury occurring on the business premises.
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 simultaneously keeping companies running smoothly.
Whether it’s a devastating fire, natural disaster, or burglary, property insurance responds. This policy reimburses MSP companies for direct property losses — dedicated servers, computing equipment, etc. — supporting recovery and momentum.
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.
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.
MSP Specialized Coverage
These policies are essential for or can be tailored to the needs of companies operating in the MSP companies space.
Types of MSP Companies that need insurance
- Complete Managed IT
- Cloud Service
- Network Support
- Helpdesk Service
- Field Tech Support
- IT Consulting
- Email Security
MSP Insurance Frequently Asked Questions
The cost of insurance for MSP companies will depend on several factors, including the company’s size and the stage of the company in its development process. Other factors include:
- Exposures: risks being insured.
- Company practices: views on safety, compliance, and risk management.
- Program structure: the amount of deductible and willingness for a company to assume more risk
- Claims history: the type and amount of past claims against the company