What Policies Do Tech Companies Need?
According to the McKinsey Global Institute, certain technologies will have a total economic effect of $14 trillion to $33 trillion per year by 2025. It’s nearly difficult to prevent risk exposure with so those zeroes.
In today’s IT and start-up industry, lawsuits are prevalent and may be highly costly, particularly Directors & Officers Insurance allegations. According to a Chubb research from 2016, one out of every four businesses had a claim in the previous three years, with an average claimed loss of $387,000.
According to the same poll, firms who did not get Directors & Officers Insurance lost an average of nearly $400,000. It’s easy to see how losses of this scale might quickly bankrupt fledgling digital firms and start-ups.
Unlike public companies that have highly publicised lawsuits from shareholders, private companies often get sued by customers, partners, vendors, and other third parties.
Furthermore, the amount of data breaches experienced by businesses increases year after year.
The number of reported data breaches increased by 40% in 2016 compared to 2015. In 2016, online behemoth Yahoo had the single biggest data breach in history, affecting over one billion accounts. If anything like this can happen to Yahoo, it can happen to anyone. That is why all computer firms, regardless of size, must be adequately insured.
What Policies Do Tech Companies Need?
While each firm has unique insurance requirements based on its size and sector, there are a few insurance products that technology businesses should consider as necessary components of their business insurance programme:
Directors and Officers (D&O) Insurance:
Covers the expenses of defence and damages (awards and settlements) resulting from unlawful conduct, allegations, and lawsuits made against your company’s board of directors and/or officials. It is a form of insurance meant to safeguard your company’s directors (both present and past) from lawsuits and litigation.
Personal assets of directors and officers are frequently at danger in tech businesses, which is why most tech companies and start-ups begin their insurance programmes with this sort of insurance, as it is necessary to have so that these assets are adequately safeguarded.
Professional investors that deal with technology businesses frequently want a seat on the board of directors. Typically, investors will not consider investing in tech firms that do not have D&O insurance in order to limit their risk.
Technology Errors & Omissions (E&O) Insurance:
One of the most significant forms of insurance for IT firms since it protects your organisation if your service or product fails to operate as expected. Most firms might simply get product liability insurance to protect themselves in the event that their product fails in some way.
However, goods such as software are not covered by these plans, necessitating the use of a different form of insurance. A technology E&O policy will cover not just liability damages, but also property losses connected to the performance of your product. Many business owners confuse technology E&O insurance with cyber insurance, but there are differences.
Technology E&O insurance is intended to cover financial damages caused to a client as a consequence of any mistakes or omissions connected to the service or product supplied by your firm, whereas cyber insurance focuses on sensitive data.
Cyber Liability Insurance:
Covers the first-party costs of a data breach, such as forensics, notification fees, and credit monitoring. This insurance also protects against third-party litigation covering different network security and privacy-related damages, as well as expenditures associated with cyber extortion, regulatory fines and penalties, and PCI fines, penalties, and assessments.
If you are sued by a customer or partner whose data was compromised as a result of anything your firm did or failed to do, a decent cyber insurance coverage should cover the expenses of defending or resolving the case. It should also cover all financial damages caused by the client as a result of the data breach.
The most comprehensive cyber insurance plans will cover both first-party and third-party losses and should be used in conjunction with your technology E&O policy and other forms of relevant company insurance, such as commercial crime.
Employment Practices Liability Insurance (EPLI):
Provides coverage for employee claims such as wrongful termination, harassment, and discrimination. EPL insurance, unlike workers compensation, is not required by law thus it may be easy to ignore, particularly for smaller tech firms that may not feel they have enough employees to merit such a coverage.
If you would like to know more about different insurances tech companies need or just to arrange a full due diligence report to see if you are adequately covered contact us today