Tech Ready

The booming tech industry in Canada is generating more than revenue for the country’s economy. It is also generating risk exposures – exposures that can be minimized, however, with appropriate risk management and insurance expertise.

Since 2007, Canada’s information and technology communications industries have accounted for 7.5% of the Canadian GDP growth, notes a report released by Industry Canada in March. Further, between 2007 and 2011, the information and technology communications sector grew faster than the Canadian economy overall, adds the same report.

Interestingly, middle-sized Canadian software companies are accounting for much of that growth, thanks to few barriers to entry and minimal start-up costs. Despite this growth, though, the middle market seems to be underserved by forward-thinking global insurance coverage that addresses today’s and tomorrow’s risks, as well as companies’ current and future business models and offerings.

RISKS REGARDLESS OF SIZE

From Zurich Canada’s perspective, this is a real problem considering that middle-market tech companies ultimately face the same risks that larger entities face, like data security and privacy breaches, global competition, supply chain disruption and reputation damage should their businesses be unable to deliver promised products or services. More specifically, tech companies are especially worried about certain risks.

Cloud Computing

Operating in the cloud is all the rage in today’s business climate. Companies from every sector, including technology, are moving their data from on-site servers to the cloud for storage. This elicits multiple risks.

First, the question of who is responsible for the data (the tech company or the cloud provider) might arise if a data breach or other event occurs. Uncertainties regarding the cloud’s security and its ability to stave off the hacking of personal information also warrants extra protection if businesses do not want their reputations damaged in the event of a security breach.

Big Data

More data is being collected now than ever before. Big data is currently a $15-billion industry, expected to grow to $45 billion in the next five years.

Within all that unstructured data, is some intellectual property, personal information, maybe even some embarrassing commentary. Should that data be hacked and leaked, the negative implications for a company’s reputation could be enormous. Further, companies could find themselves out of compliance with varying provincial and international regulations as to how such data may be collected and used.

Mobile Technology

Because of mobile devices, more people have seamless access to data than ever before. As a result, technology companies’ IT departments have to protect their businesses beyond the bricks and mortar locations where they work.

Not only is it difficult for IT to keep up with all the evolving systems and devices used by their companies, insurance policies have not necessarily kept pace with the evolution in mobile technology either. Policies might neglect to cover breaches stemming from smartphones or tablets.

And while executives at mid-size and large tech companies have similar worries keeping them up at night, mid-size companies might be even more vulnerable to such exposures since they often operate with fewer resources to solely manage their risks.

Those vulnerabilities make it that much more critical for tech companies and their brokers to ensure adequate risk management practices and insurance are in place to protect them from all the emerging risks they face on a daily basis.

Such protection does not come in the form of standard insurance policies, though. Instead, Canadian technology companies need specialty insurance offerings that protect their reputations from risks involving cloud computing, mobile device usage, big data applications, and more.

Tech companies would benefit from general liability coverage, including coverage for their own Internet and multimedia services; errors and omissions (E&O) and media liability policy endorsements that include first- and third-party coverages for privacy and security; and property coverage endorsements that incorporate original information property, research and development, and electronic vandalism coverage.

Zurich has tried to reflect these issues as part of its September release of a new suite of insurance solutions geared at the needs of mid-size technology companies. The suite, which includes more than 20 technology risk coverages based on the industry’s risk profile, seeks to ensure a holistic and comprehensive global insurance program. 

THINK GLOBAL

International coverage is seen as beneficial to tech companies. That coverage should encourage compliance with global licensing laws and regulations; offer local property, general liability and E&O compliance coverages for international operations; and provide cross-border U.S. coverage.

Finding such coverage necessitates enlisting knowledgeable brokers and insurers to customize solutions that specifically address tech companies’ complete pictures of risk.

Brokers will differentiate themselves if they take the time to understand tech companies’ needs and goals, as well as how these emerging exposures and emerging business models are presenting new risks. Brokers should be contemplative, aiming to be providers of long-term solutions, not just current insurance products.

Brokers should also be collaborating with insurers that are well-acquainted with the evolving nature of the technology industry, including current trends and emerging risks. Quality insurers will review technology clients’ risks in the context of their unique business goals and develop seamless insurance solutions that are carefully tailored to their risk tolerance.

Brokers’ technology clients will see tremendous benefit from aligning with a well-respected insurer that helps them understand exposures, identify vulnerabilities, hazards and triggers, and predict the probability of a data loss. Such insurers will allow organizations to focus more on pursuing their business.

The tech world is a competitive environment. Any disruption or shortcoming provides competitors an opportunity to earn more solid footing in the marketplace. As such, technology companies need robust risk management programs and proper insurance coverage that drive business resiliency, reduce total cost of risk, achieve business goals and maximize growth opportunities.