MSPs are Getting Harder to Insure Without Contract Management

3 min read
The Changing Landscape of Insurance for IT Managed Service Providers: The Importance of Contract Management to staying or getting your MSP insured.


In today's increasingly digital world, IT Managed Service Providers (MSPs) play a crucial role in supporting businesses by managing their IT infrastructure and ensuring seamless operations. As the demand for MSPs continues to rise, so does the complexity and risk associated with their services. This growth in complexity has not gone unnoticed by insurance companies, who are becoming more cautious about insuring MSPs. In this blog post, we will explore why insurance companies are increasingly insisting on robust contract management processes for MSPs, and how this is becoming a critical factor for securing insurance coverage in this evolving landscape.

The Rising Insurance Risk for IT Managed Service Providers:

The world of technology is constantly evolving, and so are the challenges and risks that IT Managed Service Providers face. From data breaches and cyberattacks to compliance issues and service outages, MSPs are exposed to a wide array of potential liabilities. As a result, insurance companies have had to reassess their approach to insuring these companies.
Several factors contribute to the rising insurance risk for MSPs:

Cybersecurity Threats: Cyberattacks are becoming increasingly sophisticated and frequent. MSPs, as custodians of their clients' data and infrastructure, are prime targets for cybercriminals. A successful attack could result in massive data breaches and financial losses for clients.
Regulatory Compliance: Data protection and privacy regulations, such as GDPR and HIPAA, are growing more stringent. MSPs must navigate a complex web of legal requirements and ensure their clients' compliance, which can be a challenge.
Service Outages: Downtime in IT services can result in significant financial losses and reputation damage for clients. MSPs need to have comprehensive service level agreements (SLAs) to mitigate these risks.
Contractual Obligations: MSPs enter into various contracts with their clients, and failing to meet and manage contractual obligations can lead to legal disputes and financial penalties.

The Need for Good Contract Management:

To mitigate these risks and secure insurance coverage, IT Managed Service Providers need to establish strong contract management processes. Here's why contract management is becoming increasingly important:

Risk Mitigation: Well-structured contracts with clients can help define responsibilities, liabilities, and expectations. Clarity in contractual terms can reduce the chances of disputes and legal claims.
Compliance Assurance: Robust contract management processes ensure that MSPs adhere to regulatory requirements and their clients' compliance needs, reducing the risk of fines and legal consequences.
Service Level Agreements (SLAs): Clear SLAs can help MSPs manage expectations and avoid costly penalties in the event of service outages or underperformance.
Cybersecurity: Contract management can also involve cybersecurity clauses that outline security measures, incident response plans, and liability in case of data breaches or cyberattacks.
Documentation: Proper documentation of contracts and amendments is essential. This documentation can provide crucial evidence in case of disputes or legal issues.
Renewal Management: Proper renewal management is required to assure that risks are mitigated for the MSP even after the initial contract has expired. Working with the MSP client to renew a contract allows for a pricing discussion as well as extra services.

Insurance Companies' Stance on Contract Management:

Insurance companies are taking a more stringent approach to underwriting policies for IT Managed Service Providers. They are increasingly scrutinizing the contractual arrangements MSPs have with their clients to assess the risk. Insurers are more likely to offer coverage to MSPs who can demonstrate effective contract management practices and a commitment to risk reduction.



The landscape of insurance for IT Managed Service Providers is evolving rapidly due to the increasing risks associated with their services. To secure insurance coverage and protect their businesses, MSPs must implement good contract management processes. By doing so, they can mitigate risks, ensure compliance, and establish a foundation for healthy and productive client relationships. In this changing environment, staying ahead of the game by investing in contract management is not just a best practice but an essential requirement for MSPs to thrive in the industry.

It's important to note that the insurance landscape for IT MSPs can vary by region and over time. Insurers may adapt their risk assessment and policy terms to reflect the evolving cybersecurity landscape and the specific risk profiles of their clients, however it is a very noticeable trend we are seeing at ZenContract that many of our partners have been asked to show a contract management process when being underwritten. 

ZenContract solves this requirement 100% on implementation AND may even reduce your premiums due to reduced risk, as well as all the other benefits.

Factors such as the number of high-profile cyberattacks, changes in regulations, contract management requirements and shifts in the IT industry can influence the insurance companies' risk positions.

To obtain the most up-to-date and accurate information about insurance companies' current risk positions on IT Managed Service Providers, it's advisable to consult with insurance brokers or representatives who specialize in the technology sector or to reach out directly to insurance providers. They can provide the latest insights into how insurance policies and risk assessments have evolved in response to the changing needs and challenges of IT MSPs.

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