Three ways MSPs should NOT make money with insurance
A constant question from MSPs we work with is “how can I make money on cyber insurance for my clients?” There are lots of valid strategies, such as security uplifts/upsells, or partnering with local agencies for referrals such as the Spectra referral network.
More importantly, there are multiple ways that you should NOT be attempting to make money. Here are the common mistakes we see.
- Taking commission without an insurance license. This is the most obvious one, and luckily few MSPs are foolish enough to make this mistake. However, the penalties in many states are levied against those who take the commission, and most insurance agency agreements stipulate that the recipient must keep their licenses in good standing, with little oversight. However, this can be the easiest path to receiving commissions. The insurance licensing exams are not particularly hard (the Beltex team has licensed CISSPs on staff and that is a common comparison, but the insurance exam is much simpler and takes a shorter period to study for.) Commissions are easy to come by once licensed, and agencies such as Beltex pay up to 30%.
Did you know that in Texas, Beltex’s home state for licensing, advising on insurance without a license is a third degree felony?
- Selling stand alone service warranties. This is a very gray legal area since no state department of insurance has yet issued an opinion in favor or against, and for some reason service warranty providers will not submit a request for a ruling. However, many service warranties that allow MSPs to directly resell include legal language that specifies the warranty is null and void if found to be insurance. This combined with the concept of “other insurance” that is present in traditional policies, and that few if any carriers will cover the sale/failure of warranties as part of your MSP’s Tech E&O policy make this a highly risky proposal.
Did you know that despite the warranty contract being between your client and the warranty provider, your MSP may still be liable by virtue of providing/selling the warranty?
- Referral/underwriting fees. This is actually a permissible option, but only in very (very) small amounts depending on your state. At an InsureTechATX conference in 2025, representatives from the Texas department of insurance and the past commissioner of LA department of insurance all discussed that precedent for these types of fees is typically a few cents each for a line on a spreadsheet, or a few dollars for a warm introduction. Most states enforce a requirement that all referrals must be compensated, not just for customers who actually buy a policy.
New York insurance regulations specifically limit referral fees to a $15 or less item with the agency’s branding on it in the event a customer buys a policy.