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 policies protect providers who are responsible for customers who have been promised but have not been produced returns. Cloud insurance may be included as a component of a service level agreement with a provider, or it may be purchased separately through a third party insurance company. One of the reasons why traditional IT companies are cautious about using cloud services is the risk of data loss and downtime that compromises corporate reputation. Several public cloud providers give compensation for lost time due to a system outage, but cloud services help to compensate for a loss of business when they are not available and cloud services cannot provide unintended assistance for data loss or security breach. Another approach to cloud insurance is to back up data, not financial rewards. In such a situation, a third-party service provider regularly obtains a snapshot of the provider's cloud environment, including data and applications. This extra backup "insurance" is aimed at ensuring that potential customers are secure and data is not lost. This type of insurance seems to appeal to customers using clouds that back up vital data such as photos and videos.
Online Insurance companies responded to the increased exposure to cloud servicing and developed insurance products that address these unique risks. A type of commercial general liability (CGL) and a traditional errors & omissions (E&O) insurance policy will exclude claims due to electronic data loss and privacy breaches. The primary insurance protection for these exposures is a technology error & omissions policy. The Tech E&O policy was invented to provide compensation for financial loss of a third party because the insured's products no longer function as intended, or errors or omissions of third party actions which acted against other services. However, a cloud service provider's caveat is that the general Tech E&O policy excludes the contractual liability assumed by the insured. For cloud providers, this exclusion eliminates coverage as contracts undertake most responsibilities. For this reason, it is essential for Tech E&O's policy to correct these exemptions and take on specific contractual obligations through revisions.
