Insurance for Technology Companies: What You Need To Know
By Derek May, Hub International Technology Specialist
Whether big or small, all technology companies face some level of risk in their daily business operations. For simplicity, the insurance industry has developed package policies that protect against the key exposures of technology companies. These package policies will typically contain limits for Property, General Liability, and Professional Liability (Errors & Omissions).
For those who work out of their homes, the Property component can sometimes be included in their Homeowners or Contents Insurance. It is best to check your deductible as replacement cost of the items in a home business are often relatively cheap and not worth claiming when factoring in a $500, $1,000 or $2,500 deductible. It is not uncommon for a small business to simply self-insure this portion of the risk.
General Liability is an important coverage and technology companies usually receive lower rates due to their limited exposure. This coverage protects the company in the event that there is a bodily injury or property damage claim made by a third party. You may also see limits for personal injury claims included within this section which would typically protect against copyright infringement, libel, slander and other claims of this nature. Lastly, Non-Owned Auto Liability and Damage to Hired Autos are also seen within this section and applies to claims that arise from vehicles driven to perform company business that are rented, owned by employees or on short term leases. The Non-Owned Auto component protects the company for any third party claims and the Liability for Damage to Hired Autos limit would pay to repair the damage from any accidents.
Finally, the most important part of the package policy for technology companies is the Professional Liability, also known as Errors & Omissions Insurance (E&O). Since many technology companies do not sell a tangible product, the chances of a General Liability claim are slim, however, it is essential to secure protection against the financial loss your product may cause a third party due to it not performing as intended or as described. In this case, the E&O policy should respond. There are many insurance companies vying for market share in this space so we have seen rates become very competitive. That being said, US operations as well as large increases in revenue and adding employees/products will generally push the premium upwards.
Other products on the market that may be of interest to technology companies include Cyber Insurance and Patent or Intellectual Property Insurance.
Cyber Insurance protects against the first and third party costs that a company would have to assume as a result of a breach to their systems. This coverage is becoming increasingly popular as various states and countries are enacting stricter privacy legislation which dictates what a company must do if personal information of clients or employees is exposed. The third party costs that would be covered include expenses associated with the defense of any breach-related claims; the covered first party costs include those associated with notifying affected parties, setting them up for credit monitoring, investigating the method of the breach and identifying a solution to the problem. What an affected company is required to do depends on the privacy legislation in the individual state or country.
Patent or Intellectual Property (IP) Insurance is another popular product as the technology sector is where many infringement cases arise. Suing over patent infringement is big business – companies called “Patent Trolls” exist solely for the purpose of buying up patents and suing those that appear to be infringing on these patents. “Patent Trolls” push the defendants to settle and pay out large sums to make the suit go away. These frivolous cases can be costly which makes IP Insurance a great choice as a security measure to prevent these situations.
For more information on any of the insurance products mentioned above or to receive a quote, please give me a call or visit HUB International TECHNOLOGY online for offerings exclusive to Annex Alliance members!
About the Author
Derek May is Technology Specialist with HUB International Insurance Brokers. He has been working with Annex for over three years. Contact Derek by phone at (604)331-5464 or by email at firstname.lastname@example.org
HUB International TECHNOLOGY is based in Vancouver and focuses on insuring and protecting public and private companies in the technology sector. We offer Risk Management and Loss Control strategies, placing General Liability, Property, Business Interruption, Cyber Liability, along with other coverages for all types of technology companies, including E-Commerce.