Stratton Agency Reveals Five Hidden Risks Faced By Technology Companies

SAN CARLOS, Calif., July 31, 2013 /PRNewswire/ -- A majority of technology companies are underinsured and exposed to hidden risks that could ruin their business. The Stratton Agency today announced five key risks they can address to protect their business.

"Not all insurance policies are alike," according to James Marek of the Stratton Agency. "Insurance that's not tailored to the needs of a technology company may not provide the protection that's needed. Understanding the hidden risks that tech companies face can help ensure that your business is adequately protected."

The two business insurance policies needed most by tech companies to protect their business are a business owner's or general liability (GL) policy, and an errors & omissions (E&O) policy. GL covers property damage and personal injury, while E&O protects the company against claims that its technology does not work as advertised or does not meet required specifications.

Tech businesses are often required by their customers to have GL coverage, but they frequently lack E&O coverage, even though tech companies are typically at great risk of being sued.

Even with both policies in place, tech businesses still face many hidden risks. Owners and managers can better protect their tech business by understanding the following five risks and working with their agent to close any gaps in coverage:

1.     Lack of disaster planning. A lawsuit or a natural disaster can put you out of business, unless you have the right insurance coverage. Most businesses don't. According to recent studies, 60% of U.S. companies are underinsured. That's a big reason why 60% of companies that experience a catastrophic event never reopen for business.

Every business needs to be protected against potential disasters, but especially tech companies, which typically have a higher exposure, because of investments in computer equipment, and the associated high cost to recreate or restore lost data.

To reduce your risk, meet with your insurance agent to review your coverage, identify any gaps and ensure that you are covered in case of a natural disaster, such as a hurricane or tornado.

Your agent can also help you develop a business continuity plan. Disasters strike without warning, so it's important to be prepared before a disaster takes place. Include remote locations, key vendors and suppliers in your plan.

2.     Tech insurance exclusions. GL policies often exclude claims arising from software and programming. Likewise, E&O policies often exclude information security breaches and copyright infringement on computer code.

Check to make certain your Insurance includes this coverage. Your GL policy should also include coverage for professional services, bodily injury, property damage, and personal and advertising injury arising from software or programming. Your E&O policy should include coverage for information security, breach of warranties and representation, virus transmission, and copyright infringement of software code.

Be certain you have an insurance agent who understands the risks, including emerging risks, facing tech companies, and has expertise in building programs for tech companies.

Choose an insurer with products specific to tech companies like yours. Special coverage may be available for sectors such as information technology, electronics manufacturing and telecommunications.

3.     Cyber liability confusion. Cyber incidents are increasingly common, with nearly half of all companies having experienced a data breach. Cyber incidents may also include contamination from viruses or malware, theft of laptops or mobile devices, denial of service attacks, insider abuse and negligence.

The probability of a tech company experiencing a cyber incident is high, yet only one business in 10 has cyber liability coverage.

For comprehensive coverage, you will need to add cyber liability coverage to both your GL and your E&O policies.

4.     Security measures based only on cyber crime. Tech companies and security consultants often focus on increasing network security to reduce risk. While network security is important, training employees about data security costs less, may be just as important and is often overlooked.

Cyber crime attracts most of the attention, but an even greater number of data breaches are caused unintentionally by employees and contractors.

5.     Vague claim reporting policies. For a professional liability claim to be covered, it typically must be reported within either 60 or 90 days, depending on how the policy is written.

However, some insurers start the reporting period before a lawsuit is even filed. A heated discussion or the threat of a lawsuit may be enough to trigger the reporting period, even if management is unaware that it took place.

Vague policies can put your claim at risk, so make certain your insurer has clear reporting procedures. Some policies don't begin the reporting period until the company is notified that a lawsuit has been filed. The policy should also define who must report the claim and what duties that person has when informing the insurer.

You may also consider adding an extended reporting period to your policy.

Finally, as an integral member of your risk management team, your attorney should review all contracts to ensure they do not run counter to your liability policy. If you enter into a contract that is at odds with your liability policy, your claim may not be covered and your policy may not be renewed.

For more information about hidden risks faced by tech companies, please contact the Stratton Agency or visit www.strattonagency.com.  

About Stratton Agency

Stratton Agency of San Carlos, Calif., is an IIABA Best Practices provider of insurance brokerage, risk management and insurance technologies. For additional information, visit www.strattonagency.com.

CONTACT:
Stratton Agency:

James Marek

Phone:650-508-0124

Email:[email protected]

SOURCE Stratton Agency