Insurance policies

How modern tech companies are leaving old insurance policies in the dust

Modern technology companies evolve at a much faster rate than the insurance policies designed to protect them, says Michael Brunero, head of technology, media and intellectual property (IP) at CFC Underwriting.

“To be completely honest, we started to realize that the policy we were originally selling to these customers looked like it was designed for companies that were around 20 years ago,” Brunero said. in an interview with Canadian underwriter.

Historically, technology and media policies have tended to create “silos” of policy coverage, or even different policies, based on various causes of loss. “Was it caused by a tangible product like hardware? Was this caused by software? Was it caused by tips? Or was it caused by some sort of installation work? Brunero asks. “What loss has been suffered? And then [the policies] look, ‘Was it bodily injury or property damage or was it financial loss?’ then try to categorize them across different policies.

For example, an intellectual property liability policy developed decades ago sought to determine whether software was a product or a service. “It feels like 30 years on the track,” Brunero says of the traditional approach. “We don’t need to have that argument anymore. What we really need to do is just come up with a complete and logical solution for modern technology businesses. »

It starts with a more holistic policy approach.

For example, three decades ago a company might only provide one piece of software. But a current Internet of Things company could use a piece of hardware embedded in software that is also connected to a controlled platform on the Internet. “So the technology is so much more complicated, but our policies were originally designed for much more simplistic businesses,” says Brunero.

CFC has recently revamped and modernized its own policy wordings to move away from the traditional practice of placing exposures in different buckets in separate policies (which may have different wordings from insurers that do not match perfectly). A client may have needed a cyber policy, a general liability policy to cover intangible products and personal injury caused by services, and then an E&O product to cover services rendered and financial loss.

“Rather than having multiple policies dealing with a client’s business in terms of general liability policy and E&O policy, we have essentially combined them in one place,” says Brunero. “So whatever the customer does, they’re covered by the one insurance clause. You are not worried about this coverage gap.

“What we really tried to do was produce something that was familiar enough to insurance brokers and felt like what they expected, but just a lot more relevant to the end customer.”

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The main change is what the CFC calls “product and service liability.” Rather, it’s an all-risk policy that also offers broad contractual cover – something that isn’t always covered by traditional policies and is still one of the main loss drivers. Canadian brokers in particular have been receptive to the new wording, Brunero adds.

Rising environmental, social and governance (ESG) issues are also coming into play as more companies consider or adopt green technologies. One example is solar-powered animal tracking, where tracking equipment is applied to farm animals so that farms can track livestock. This equipment is even now used specifically for endangered wild animals to monitor their numbers and prevent them from poaching.

“I expect this to be a huge growth area for the industry over the next few years,” says Brunero. “I think the reputational aspects will also start to play a role, because insurers don’t necessarily want to be affiliated with huge polluters.”

The world of entertainment is now very different, with content creators on Instagram and YouTube sometimes starting their account for fun only to see them grow into fully functioning businesses, but perhaps without considering all the exposures associated with management. of an online business.

“[With] a lot of these modern businesses, we find there’s a bit of ‘too little, too late’ involved,” says Brunero. “We’ve seen several influencers come to us after the fact saying, ‘I actually just got sued by a big studio because I posted an article that had a piece of music from one of their artists in it and now I ‘I am being sued.'”

Another common “after the fact” claim involves an influencer’s account that was hacked and the entire business disappeared. “We see that happening a bit,” says Brunero. “Without a follower base and all of your content, your Instagram account doesn’t have much value.”

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