IT Insurance - Bare necessity for every IT business

Information Technology and Risk -

In an ever changing scenario of flux, IT companies are exposed to increasing client demands, changing user requirements in a highly competitive landscape.  Companies are vulnerable to professional liability claims arising from errors and omissions, negligence in conduct of services.  The risk of loss of data, security information is sometimes too great and may bring about expensive lawsuits that may jeopardize the financial standing of an organization. As a backup against the disaster, an IT insurance company aims at indemnifying organization against situations ranging from data design to fund transfer and everything in between.

Why do you need a separate IT insurance for your business?

Unlike any other business, one can never categorize Information Technology as a product or as a service. This blurred distinction makes it difficult to cover all IT claims by professional indemnity insurance or a product liability cover. For instance, typical professional indemnity insurance would indemnify an organization if the lawsuit is in relation to some flaw in design. But if it is a case of software errors or service of the developers concerned, it simply falls out of its scope. In order to bridge the gap between the insurance covers, insurance companies found it essential to bring about new scheme for IT service providers.  

What does IT insurance provide?

A typical IT insurance contract includes
1.    Insurance cover for claims arising from failure of computer products, services and/or advice
2.    Infringement of copyright, trademark, registered design or any other plagiarism.
3.    Breach of confidential client information
4.    Errors and Omissions
5.     Personal Injury and Property Damage to client’s products.

It is a fact that every company is different, and so are their modes of operation. Most IT insurance providers recon with this and provide customized solution packages. In a way, a typical IT insurance policy covers professional indemnity and also product liability insurance and blends the same in the parlance of information technology.  IT insurance company provides coverage on electronic publishing, web casting and distribution of virtual content over internet. The company is also given protection against professional hazards like unauthorized access and use of service on the computer system, network operations systems link and support workstations, personal computers and terminals. A single problem in any of the above would not only interrupt the smooth flow of the business but entirely jeopardize the network support system. Insurance companies today provide cover against Network Operations Systems breakdown so as to protect business against such stringent circumstances.  

Over years, the popularity of IT insurance has ever increased. Most businesses find it imperative to buy this particular coverage so as to secure financial status and goodwill of their business.  From being an optional overhead expenditure, IT insurance is now a must have for the industry.

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About the author

Robert Ellis is a freelance insurance advisor who provides suggestions to clients on various aspects of business insurance. He is associated with Bizcover.com.au and provides guidelines on IT insurance, accounting insurance, professional indemnity insurance, office and business insurance and more.

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