If I outsource my IT, do I need cyber insurance?

9 reasons you should consider cyber protection: 

1. Shared Liability? Not necessarily.

Outsourcing IT doesn’t fully transfer all the risk to the provider. In case of a data breach, both your company and the service provider can be held responsible, especially if sensitive customer or business data is compromised. You may still face lawsuits, regulatory fines, or reputational damage. Cyber insurance can help cover these costs.  

2. Third-Party Errors

Your IT provider could make mistakes or experience vulnerabilities themselves. While they might have their own insurance, it may not cover all damages or liabilities that fall on your company.  Cyber insurance helps protect you if the third-party’s systems are breached or if they mismanage your data. 

4. Regulatory Compliance

Many industries require you to demonstrate compliance with data protection laws (like GDPR, HIPAA, etc.). Even if a third-party IT provider is involved, your business could be held liable for compliance breaches. Cyber insurance can cover legal fees, regulatory fines, and notification costs that may arise from such incidents. 

5. Reputational Damage

Regardless of whether the breach is your fault or that of your IT company, the breach can seriously damage your reputation, resulting in loss of customers and future business. Cyber insurance may cover public relations efforts or even compensation to customers affected by the breach to mitigate reputational harm. 

6. Contractual Obligations

Some contracts with clients or partners might require you to have cyber insurance, regardless of whether your IT is managed by a third party. This ensures all parties are protected in the event of a breach. 

7. Vendor Risk

Don’t just think in terms of external IT service providers. What about third-party software services you may be dependent upon? Third-party software vendors can themselves be vulnerable to cyber threats. Cyber insurance can help cover your costs if a vendor is compromised, which could result in cascading effects on your business. It serves as an added layer of protection beyond the vendor’s own safeguards. 

8. Legal Fees and Defence

In the event of a breach, lawsuits are common. Even if the fault lies with your IT provider, you may still have to pay legal fees to defend your company. Cyber insurance often covers these costs, including settlements or court awards. 

8.  First-Party Losses

A breach could disrupt your operations, leading to downtime, lost revenue, or costs related to recovery (e.g., restoring systems or data). Cyber insurance often covers these “first-party” losses that directly affect your business, including business interruption and data restoration costs, regardless of who is handling your IT.

Also, ask yourself how comfortable you’ll be relying on your service provider to indemnify you if the breach is their fault. Providers will often point to terms and conditions of service which limit their liability to a sum far less than the loss you’ve suffered. 

9. IT versus Cybersecurity

Cybersecurity companies and IT service providers offer distinct services based on their areas of expertise. Don’t assume that your outsourced IT partner is a cybersecurity expert. Cybersecurity companies focus on protecting organisations from cyber threats, while IT service providers manage general technology infrastructure.

How certain are you that your IT provider can help you respond and recover from a cyber attack?

Cyber insurance provides specialist breach response services you need to help you respond to and recover from a cyber event. 

Summary: 

Cyber insurance complements your outsourced IT setup by addressing liabilities, costs, and risks that your third-party provider may not fully cover. It is an essential layer of protection in today’s complex risk landscape. To discuss the cyber threats to your business, reach out to one of our advisers today or visit or our Cyber page for further details.