Professional indemnity insurance, or protection for “bad advice”, is possibly the most important insurance protection for MSPs. Listen to Andrew Bremner from SherpaTech discuss the implications of professional indemnity, cyber insurance and more with James David from Pax8.
Featuring: Andrew Bremner (SherpaTech) and James David (Pax8)
Length: 3 minutes
Part of a three-part series. Watch Part 2: Contracts and Part 3: Cyber Insurance.
Key takeaways
- The two big questions MSPs ask are what cyber insurance really covers and what liabilities they take on when they manage client environments.
- Professional indemnity insurance protects an MSP against claims for bad advice, or perceived bad advice, that ends up damaging the end customer.
- Andrew explains that most of an MSP's exposure is not cyber exposure but professional indemnity exposure.
- Larger organisations usually require professional indemnity and public liability insurance before an MSP can join their supplier panel.
- Smaller MSPs are often either uninsured or very aware of the risk and keen to have cover in place.
- Customers are holding MSPs much more accountable for their work, which makes the right insurance more important.
Transcript
James David: So, with your heavy involvement with MSPs, what are the big questions you hear them asking? The two main ones are really about what cyber insurance really covers, and what the liabilities are. I'm trying to think of the right word for it, but the risk involved with an MSP managing client environments, and what that means on the legal side as well.
Andrew Bremner: Yeah, really great questions. Why don't we start with cyber insurance, or cyber liability, and what it's about. Now, I might digress a little and touch on professional indemnity. Professional indemnity is the insurance that is there to protect you for bad advice, or perceived bad advice. So if you advise a client, or provide them with a solution, that ends up damaging the end customer, they might blame you and make a claim against you. Your protection as an MSP is professional indemnity.
Interestingly enough, what we find in the MSP space is that most of their exposure is not necessarily cyber exposure. It's professional indemnity exposure. So that's the first point.
James David: It's a good point, because a lot of MSPs don't think about professional indemnity. What I've seen over time in the industry is that people have it, but they've very rarely had to use it. It's only recently, because of cyber security incidents and insurance companies going after people to recover their money, that they're starting to realise how important professional indemnity really is.
Andrew Bremner: Yeah, it's great that you raise that. What we find is there are two parts to this. The big end of town, when they engage an MSP, require professional indemnity and public liability, which is the physical injury protection, as part of their procurement requirements to join the panel. So a lot of MSPs just buy it because they need it to get on the panel. That's one group.
The second group is the small MSPs. They're often either uninsured, or they're actually conscious of the risk and want to have that protection in place. So we're seeing two distinct groups. But without doubt, customers are making MSPs much more accountable for the work that they do. We'll possibly touch on that further, but we're seeing the importance of that insurance come through strongly.
