Technology Insurance 101
Technology Insurance is crucial for technology, information and knowledge based companies that own rights to valuable intangible assets, such as sensitive data, software and intellectual property, which a general liability policy doesn’t account for. General liability provides protection in the event of bodily injury or property damage. Technology insurance coverage is designed to protect against the significant risk of economic loss related to intellectual property, network liability and network and cyber property security.
A comprehensive risk management plan needs to guard against the unique exposures that technology operations present. Specialized technology insurance is relatively new and the terminology is still evolving as more claims are handled and new exposures are discovered. As a result, the terminology can be confusing and hard to understand. The following technology insurance terms are some of the most common you will need to know to understand your technology insurance options:
Cyber Liability and (Information) Technology Insurance
Regardless of industry, digital business records and/or business conducted online are potential hacker targets. Despite precautions such as network and device security, criminals are still able to access commercial systems and records and exploit them for financial gain.
In fact, 1 in 5 businesses is affected by a cyber incident. Out of those, 20% of Canadian businesses affected by cybercrime:
- 20% were small businesses
- 28% were medium-sized businesses, and
- 41% were large companies
These numbers show that it’s not just major corporations that are targeted for cyber-attacks. They also show that despite having stringent digital security software and protocols, those major corporations still fell victim to cybercrime. Cybercrime costs Canadian companies millions of dollars a year – an amount that keeps trending upwards. Those increases are also happening in spite of advances in cybersecurity software.
Some common cyber-threats that businesses face:
- Phishing – commonly used against individuals and businesses. Phishing is primarily done through an email sent to a user or employee that looks to be from a trusted source. The email will send the user to an unsecured site and prompts the user to enter sensitive information. The hacker then uses the login credentials to access secure systems, stealing data, personal information or funds.
- Malware – software installed on a device that can monitor activity and keystrokes, send confidential information to another computer and/or gives the hacker control over the infected device.
- Ransomware – a hacker will gain access to a computer or network and encrypt the data contained within, blackmailing the business for a release of its data.
Information technology insurance that addresses cyber liability is a basic layer of protection necessary for all businesses that use technology in their operations. As they usually cover the costs of repair to hardware and systems, as well as costs to restore data, other information technology insurance coverages are often necessary, depending on the business.
Data Breach Notification Laws and (Information) Technology Insurance
With potential fines of $100,000 per offence, business owners who do not fully comprehend their legal obligations in the event of a data breach could see their businesses bankrupt overnight. Information technology insurance for data breach notification acts as a support that helps with the costs of notifications and guidance on when notifications are necessary.
There is also a cost to over-notification. Notifications made when unnecessary not only cost the time and money spent making them, but reputational costs and loss of customer confidence could deliver a significant blow to a business’s bottom line.
Technology Insurance Concerning Errors & Omissions (E&O)
Companies that typically require information technology insurance coverage for errors and omissions include (with a few examples of the risks faced by each):
- Software developers – for coding errors, late delivery of software or software not meeting contracted specifications
- IT Service Providers – for interruption of services that result in client losses
- App Developers – for technical glitches, late release of app and more
- Manufacturers of Electronics and Telecommunication Components – for faulty or misrepresented products
- Computer Programming Services – for coding errors or mistakes in testing
- Computer Support, Rentals, Maintenance and Repair Services – for data losses or lost client productivity
- Computer Facilities Management Services – for losses that can be traced back to the service
- Information Retrieval Services – for data breaches or loss of information integrity
- Robotics Companies – for accidents or injuries caused by robotic products
- Internet Service Providers and Colocation Services – for hardware or software failures and service interruptions that lead to losses
If your clients can show that some form of negligence in your service resulted in a loss, they may seek legal recourse. Information technology insurance specifically for errors and omissions acts as protection against the substantial legal costs stemming from a claim for damages.
(Information) Technology Insurance Concerning Media and Intellectual Property Liability
Information technology insurance that addresses intellectual property is commonly needed for legal costs. Generally, there are two applications for intellectual property insurance: to help protect a company from allegations of infringement of intellectual property and to assist a company in pursuing a claim of IP infringement. They are known as infringement defence and abatement enforcement coverage respectively.
Intellectual property can include:
- Trade secrets
With the increasing popularity and power of digital media, content published over the internet is under proportionally increasing scrutiny. Like traditional media publishers, digital media outlets are also subject to litigation for defamation and libel. If an injured person can show cause that a media site is responsible for damages, the owners of that site could potentially face crippling legal costs and awards.
An information technology insurance policy for media may cover:
- Breach of copyrighted or trademarked property
- Virus transmission
- Misuse of information
- Employee misconduct
Companies that operate in the information technology space must be aware of the threats and risks inherent in each of their specific niches and how to protect themselves from those risks. There are lots of information technology insurance policies out there. Our ALIGNED Insurance brokers will work with you to provide the best package with the right coverage to help protect you from the risks specific to your business.
Given the pace at which technology evolves it is clear that exposures and threats to “technology” companies will continue to grow as the technology industry does.
For More Information On Technology Insurance And Choosing The Right Solutions For Your specific Business Needs Contact An ALIGNED Insurance Advocate Today At 1-866-287-0448.