MSPs: Cyber Insurance is coming for my clients! Part 1: The Real Worry
This is post is written by one of the Beltex founders who has owned/operated two MSPs, and is familiar with defensive posturing and selling against insurance security services. Knock on wood, across 100+ clients (with a cyber insurance policy, including from carriers with MSSP divisions) and a few claims, there have been zero serious considerations by clients about switching security providers.
Check any MSP groups on Facebook, LinkedIn, or Reddit. There are multiple posts per month from MSPs concerned about insurance carrier MSSPs coming for their clients. While this is absolutely a reality, it is no more of an existential threat than copier companies and ISPs providing managed services.
What is the reality of what is going on? As some new of the newer policy providers launched and labeled themselves “InsureTechs”, they quickly realized that what we do as MSPs/MSSPs is harder than it looks. Even hundreds of millions in investment could not magically fix insurance. The real issue was the low level of cyber security most SMBs have. This is where things took a wrong turn. Rather than embracing the already massive MSP industry, some insurers decided they were the only ones who could fix things. That led to the launch and acquisition of multiple MSSP divisions.
Why should I not be worried about the carrier MSSPs? If an agency wants to offer cyber security, they frequently will find better (and higher margin) options instead of selling a commodity service from a carrier. Additionally, most SMBs and agents are targeting one thing: the most affordable policies. Security services are a very low priority. Due to the rapidly changing nature of the cyber insurance industry, the most affordable policies change multiple times per year. Previous InsureTech leaders are struggling to maintain their advantages, and their security services lag as well. One prominent example is Corvus, who after talking a large investment valuing the company at $750mm in 2021. Two years later the cyber insurer sold to Travelers for $435mm, a reduction of over 40%. Currently we’re seeing multiple insurers such as CFC, AmTrust, and Canopius offer substantially better rates and coverages versus the leaders from a year ago.
If I should not be worrying about the carriers, what should I be worried about? The real risk to MSPs is coming from hybrid MS(S)P / insurance agencies. The most prominent example is Acrisure, a $4b+ company with their name on the Pittsburgh Steelers’ stadium. With a giant private equity backing, their average client is 50 seats on under. By acquiring MSPs, they are now a one stop shop for their clients’ insurance, cyber security and MSP services. The Beltex team is encountering multiple hybrids like this on a monthly basis.
We continue to see venture capital and private equity pour into the insurance industry. Already there is a terrible reputation for what happens with MSP vendors when they take outside investment – rapidly declining customer service, poorly launched new platforms and services, and dirt-cheap prices to go alongside it. Combine the two industries to expect a short-term land grab of new clients at low prices, but long term failures. A great opportunity for MSPs who can defend their client base and be ready for the failure of these investor backed agencies. In part 2 we review how to take advantage of the coming chaos.