Managed services providers (MSPs) are starting to see the necessity of liability insurance policies as the IT field continues to grow more complex. They see this change as a necessity to get the right coverage for their businesses.
Michael Corey, who used to work for a managed services company, recalls a time when a large oil company wanted to hire their services to manage its computes remotely. He says that although they have not formally met yet, the company wanted Corey’s firm to insure them for up to $20 million in case something unexpected happens, leading to an explosion, fatality, and/or damages while one of his people was on site. It was understandable as companies have been following this standard practice for years when dealing with service providers. However, Corey argued that the amount that the client was looking for was nowhere near expected. It took him a lot of meetings and negotiations before he finally got a waiver. He said it slowed down the sales cycle by two months—two months spend negotiating and explaining each other’s sides instead of getting started with the actual work. Corey now works as a co-founder of an audit protection insurance and license management for Oracle called License Fortress.
Liability Insurance Policies
With the growing popularity, and therefore risks, in data management, MSPs are starting to consider liability insurance policies to protect themselves. A cyber liability insurance, in their perspective, is absolutely necessary for when unexpected harm happens to the customer while they are in charge. As of now, not all MSPs have this kind of insurance, which makes it difficult for them to protect themselves from data loss or cyberattacks—things that could harm their clients which, sometimes, is out of their control. It works in a similar fashion with audit protection insurance in a way that users are protected from unexpected costs incurred to them through no fault of their own.
Corey adds that when a management services provider takes over a business’ IT environment, their clients put their trust on them. This means that once they take over, they are held responsible for everything that happens to it, even in terms of cyberattacks and other things out of their control. They believe that liability insurance policies will help MSPs perform their duties while getting proper coverage as well.