Overview of the Tech industry
With numerous digital transformations emerging, the pace of innovation is only accelerating. Even over the past three years, 45% of IT executives and business have reported a significant push on the technological gas pedal.
With no sign of a yellow light on the digital frontier, artificial intelligence trends are popping up all over large enterprises and entrepreneurial startups alike. Moving IT systems to the cloud, for example, is an initiative 60% of enterprises are expected to undertake in the near future.
Unsurprisingly, it doesn’t stop there. Plenty more AI implementations are due to take place—over 30% more than in past years, in fact . Meaning, more devices will become connected, opening the door to identity and privacy protection being a top concern.
It’s no secret that to get to the technology of tomorrow, certain foundational macro forces will make it happen—cyber, the business of technology, and core modernization. Ultimately, it’s all hands on deck for tech companies.
Some of the biggest risks Tech companies face
Why is Insurance for Tech Organizations Important?
Case studies in the news:
Google:
Running for nearly a decade, Google’s antitrust probes were the main aim of a $1.7 billion fine. The U.S. tech giant was called out for market abuse regarding the company’s popular software for Android phones and shopping-related searches.
See: Google Fined $1.7 Billion Over Advertising Market Abuse
Apple:
From an “eavesdropping” Apple glitch to a secret Canadian sex toy scandal, Chicago-based attorney Jay Edelson has won his clients millions in class-action cases. His innovative approach targets tech companies who play fast and loose with consumer privacy.
See: Big Tech Vs. Small Privacy Lawsuits
Uber:
Philadelphia lawyers called upon Uber to open their books, setting their sights set on a slew of business operating audits. Filed by three drivers, this popular rideshare app faced three years-worth of various unpaid taxes.
See: Philadelphia drivers’ lawsuit a risk t Uber as tech giant prepares to go public
Oracle:
Backed by a high degree of statistical evidence, Oracle endured scrutiny from over 4,200 female employees. The California-based tech company faced class-action complaints regarding sexual misconduct, uneven pay, and biased workplaces.
See: Oracle systematically underpaid thousands of women, lawsuit says
Yahoo:
Two different data breaches, possibly impacting all of Yahoo’s users, catapulted a securities class-action lawsuit. Additionally, shareholders filed numerous lawsuits against Yahoo’s board and senior managers which was later consolidated.
See: Yahoo Data Breach-Related Derivative Suit Settled for $29 Million
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What Insurance do Tech companies need?
Cyber Insurance
What it covers:
This protects your organization from lawsuits, fines and penalties arising out of a hacking attack or data breach. It can also reimburse the company for its direct expenses such as breach notification costs, credit monitoring, data restoration and forensic analysis.
Why you need it?:
If you collect any sort of personal or organizational information, have a “login” feature on your site, integrate with another organization’s systems in any way, have employees who could fall for a phishing scam, generate online content such as blog posts or even simply rely heavily on email communications, you need cyber liability insurance. Fintech companies who regularly process transactions are highly visible targets for hackers and, as such, should be protected.
Intellectual Property Insurance
What it covers:
Protects the company and its intellectual property. Policies can work two ways: 1. Defense policies provide legal defense costs if you are sued for an IP infringement 2. Abatement policies help cover the cost of enforcing your own IP rights
Why you need it?:
IP litigation is common and expensive. Companies in innovative, disruptive and/or competitive spaces may face suits from both competitors and patent trolls. For the latter, just having this policy in-force can act as a deterrent. In the case of competitors who may have a more valid claim, the policy provides much needed capital so that the company’s balance sheet doesn’t have to take the hit. (Not to mention the benefit of partnering with an experienced claims team who can guide you through the process).
Directors & Officers Insurance
What it covers:
Protects the company and key individuals from liability related to the management of the organization. Companies that indemnify their executives against certain covered claims can turn to their D&O policy for reimbursement. In addition, if the organization itself is named in a suit, the policy would defend the entity.
Why you need it?:
Ensures the company and its leadership is protected from legal liability related to allegations of breach of fiduciary duty and other management-related claims. It provides the capital required to absorb certain legal costs without mortgaging the future of the entire organization.
Technology Errors & Omissions
What it covers:
Also referred to as “Errors & Omissions ” or “malpractice” insurance. It covers technology companies if an act, error, or omission committed in the course of the company’s performance of professional services is alleged to have caused a financial loss for a third party.
Why you need it?:
Complex litigation expensive and there’s a lot that can go wrong for tech companies in particular. The policy responds to the threat of professional service disputes by paying legal fees and judgments or settlements that result from a lawsuit for an alleged failure in the provision of professional services.
General Liability Insurance
What it covers:
Covers the organization from some of the fundamental risks that come with running an technology organization, such as ‘slip and fall’ claims, damage to a third party’s property, products liability claims, damage to rented space, and personal or advertising injury claims.
Why you need it?:
It forms the foundation of any risk management program. On top of protecting the company from legal liability caused by bodily injury or property damage, this coverage is usually required in contracts like office leases and vendor agreements.
Employment Practices Liability Insurance
What it covers:
Protects the organization and its management by paying the costs of defending against certain suits from employees or investigations from government agencies. Common claims include allegations of harassment, discrimination, retaliation, and wrongful termination.
Why you need it?:
If you or the organization itself is named in such a claim, the coverage would defend you and pay the judgment or settlement against you. Keep in mind how easy it is for an employee to start an action that requires a legal defense.
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How much does Insurance for Technology Companies cost?
In the game of insurance underwriting, how premiums are determined is often a massive secret. Yet, there are a few upfront elements that influence the cost.
To begin with, your projected annual revenue will weight heavily on the rating. For young tech companies with an unknown forecast, insurance companies might rate your company based on the number of employees or location details. As it goes, these two factors will be thrown into the pot anyway.
Additionally, the service or product that you provide will also influence the number your premium settles on. Lastly, your claim history (if you have any) will undoubtedly reflect in that major underwriting decision.
Each policy type is rated differently and will vary in premium. We recently anlayzed our D&O Insurance policy database and examined avg. pricing by industry:
Types of Technology Companies that need insurance
Consider that within the next decade (probably less), the economic impact of Tech companies from around the globe will hit the trillions—making it impossible to circumvent risk exposure. No matter how big or small, young or old your digital innovations, all Tech companies need to be covered, including: