Liability Insurance for Cloud Service Providers

Technology is evolving at a rapid rate and it shows no sign of slowing up just yet. The biggest development in the past year has been the explosion of uptake on Cloud technology. So should liability insurance for Cloud Service Providers be mandatory? We run through the pros and cons of a Cloud Service Provider subscribing to liability insurance.

Pros and Cons

With the huge amounts of data now being stored in the cloud, liability insurance for Cloud Service Providers has opened a new market with huge potential. But why would a Cloud Service Provider need liability insurance in the first place? Well, common events that open up a Provider to possible legal action from a customer is losing data or even leaking data to unknown sources. Another common occurance is power cuts that bring down the Provider's servers for a length of time which prevents customers from accessing their data.

Lets start with the pros that liability insurance offers. Cloud liability insurance will cover a Service Provider against any lost data and against power outages. Since data is not tangible and physical, standard insurance policies will not cover loss of data so liability insurance specifically for data is a welcome insurance product in the market. A company with an insurance policy in place may also become more attractive to potential customers with a lot of data to be housed.

The cons also need to be taken into consideration and their is a major one that is immediately apparent. A Cloud Service Provider that takes out liability insurance could become more lax in terms of securing the data they hold precicely because they have an insurance policy. Liability insurance also does not take away from the fact that any data lost or leaked may never be recovered again so it cannot really protect against the customer losing what is most valuable to them.

Yay or Nay?

So should liability insurance be mandatory for Cloud Service Providers? It seems like it will be something Providers will invest in but the key remains that a company does not use a policy like a crutch. Instead, each Provider needs to remain vigilant and innovative in protecting and securing all the data they are responsible for.

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