cloud insurance

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. 

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.  

A cloud insurance policy protects the cloud provider who is held responsible for a service that was promised but not delivered as well as customers who believe they did not receive promised results. Cloud insurance may be included as part of a service level agreement (SLA) with the provider or it may be purchased separately through a third-party insurance company. The Cloud and Managed Services Insurance program from the MSPAlliance, for example, offers members cyber and contractual liability, as well as errors and omissions insurance.

One of the reasons traditional IT shops are cautious about using cloud services is the risk associated with an outage that results in lost business or harm to a company’s reputation. Although some public cloud providers offer remuneration for time lost due to a system outage in their service-level agreements, cloud insurance can help compensate for business that is lost while a cloud service is unavailable and provide the cloud customer with financial protection in the event of an unintentional data loss or security breach.  

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.

This was first published in May 2013

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