Why Good MSPs Stay Invisible to Cyber Insurers - And How You Change That

The irony? While many insurers treat MSPs like the enemy, they're competing in a crowded $15 billion cyber insurance market, struggling to penetrate small businesses - the exact companies you're already serving. Meanwhile, the MSP channel has grown to $400 billion in North America alone, with over 50% of SMBs outsourcing at least some aspects of their IT or security.

That disconnect may be frustrating, but it’s also creating an opportunity for MSPs who understand what insurers actually need - and can prove they deliver it.

The Compliance Theater Problem

Here's what most insurers miss: they're asking the wrong questions.

After three years of presenting to underwriters and portfolio managers at some of the largest insurance and reinsurance carriers in the world, I've watched the same pattern repeat. Insurers default to compliance frameworks, essentially replicating ISO 27001 or SOC 2 standards, and call it risk assessment. They focus on policies, procedures, and documentation. The security theater that makes executives feel good but tells you almost nothing about actual exposure.

What they don't ask about: the services you're actually delivering to customers. Your service mix, whether you're running 10% of clients on managed services contracts versus 90%, matters more than any policy document. The specific security stack you deploy, how consistently you deploy it, and how you verify those deployments across your client base. That's where real risk lives.

Because here's the reality most insurers don't grasp: an MSP delivering high-quality managed services with consistent security deployments across 100 clients is fundamentally different from one doing 90% break-fix work, where clients only call when something’s already broken. On paper, using the compliance lens, they look identical.

Your Diversification Advantage (That Insurers Don't See)

The Kaseya incident a few years ago, when ransomware spread to 1,500+ businesses through a single compromise, created lasting trauma in the insurance market. It reinforced the narrative that MSPs are dangerous concentration points for systemic risk.

But that logic is backwards.

A majority of the MSP market consists of small and fragmented players, skewing Insurer's perception of them. You've assembled solutions from multiple providers: maybe Microsoft for cloud services, Okta or Duo for identity, a different endpoint provider, a separate MDR solution, and distinct backup and disaster recovery tools. Some of you use private data centers, others public clouds. You're verticalized by industry and geographically dispersed.

Compare that to what happens when insurers "solve" the MSP problem by partnering with a single vendor or delivering their own MDR services. They just created a massive accumulation risk around that vendor's technology stack.

The math is simple: as you bring on more independent MSPs, you increase diversification at the technical level. Different vendor combinations, different industries, different geographies. That's exactly what portfolio managers and reinsurers are looking for to ensure their book of business remains resilient to potential Black Swan events.

But right now, there's no mechanism for good MSPs to be recognized and rewarded for these diversification and performance benefits. You're getting lumped in with every break-fix shop and reseller calling themselves "managed services."

The Intelligence Gap You Can Fill

Insurance companies only see data from claims. They know what failed catastrophically. What they don't see: the near misses, the security incidents you remediated before they became claims, the daily firefighting that keeps your customers up and running.

You're on the front lines. You understand what separates a resilient small business from a vulnerable one, not based on a questionnaire or external scan, but from actually working with customers day-to-day.

That intelligence is valuable. Insurers crave it. They need to feed real-world data back to the market so they can price risk accurately and help prevent claims. But most are so used to speaking “insurancese” to each other, they've forgotten how to communicate with the real world.

The opportunity: MSPs who can translate their front-line intelligence into the exposure data insurers need become strategic partners, not just policy applicants. You can demonstrate the security outcomes you're achieving, the deployment consistency across your client base, and the specific controls reducing claim likelihood.

What Exposure-Based Underwriting Means for You

The insurance market is slowly shifting from "take all the premium we can get" to exposure-based underwriting, actually understanding the risk before writing the policy.

This is where differentiation happens. When insurers validate the quality of components in your solution stack, verify your service contracts, and review actual deployment data instead of attestations, suddenly there's daylight between a well-run MSP and the pack.

The reality: many insurers have no idea what their actual exposure is. They assume 30% AWS market share means 30% of their portfolio is exposed to an AWS outage. In reality, by chance, 80% of their book might depend on AWS, they just don't verify it. Or the opposite: they have capital locked up reserved against AWS risks when they have minimal exposure to that cloud provider.

For you, this means the ability to demonstrate your actual tech stack, your deployment verification processes, and your service delivery model isn't just good operations, it's competitive differentiation in an insurance market that desperately needs better data.

The Bottom Line

The insurance market is leaving money on the table by misunderstanding MSPs. But that misunderstanding creates your opportunity.

Insurers need what you have: diversified technical implementations, consistent security deployments, and intelligence from the front lines. The MSPs who can quantify and demonstrate these capabilities won't just get better insurance terms for themselves and their customers; they'll position themselves as strategic partners in a market that's trying to figure out how to profitably serve the $400 billion SMB channel.

The question isn't whether insurers will eventually figure this out. They will, because the economics force it. The question is whether you'll be positioned as one of the "good" MSPs when they do, or still lumped in with the break-fix shops calling themselves managed services.