Cloud insurance is an approach to risk management in which a promise of financial compensation is made for specific potential failures on the part of a cloud computing service provider. The insurance may be included as part of a service level agreement (SLA) with the provider or it may be purchase separately through a third-party insurance company who works with the provider.
One of the major reasons traditional IT shops are unwilling to switch to cloud services is the risk associated with security breaches and outages that result in lost business or harm to a company’s reputation. Some public cloud providers offer remuneration for time lost when a system is down, but not for the business that is lost while the cloud service is unavailable. A cloud insurance policy would cover the loss of potential business in the event of downtime.
Another approach to cloud insurance involves data backup and not financial remuneration. In such a scenario a third-party service provider periodically takes snapshots of the provider’s cloud environment, including data and applications. This extra backup “insurance” is intended to assure potential customers that their data is safe and can never be lost. This type of insurance seems to appeal to customers who use the cloud for backing up data that is not sensitive but is still valuable, such as photographs and video.