It is but obvious that business insurances will be industry specific. Each business entity, depending on – sector, budget, size, employee strength, the kind of products and services it offers, among other factors, will need specific business insurances tailored to its needs. If you are a business owner, you need to be aware of your exact insurance requirements, specific to your company and industry. This could be difficult to assess in the beginning. You certainly need to be aware of which pitfalls to avoid and not end up wasting precious money on insurances that won’t serve any purpose to you.
A good way to avoid perilous gaps in your insurance The legal document issued to the policyholder that outlines the conditions and terms of the insurance; also called the ‘policy is to plan. The one size fits all strategy seems fallacious when it comes to choosing insurance for your enterprise.
In this blog, we look at insurance needs specifically for the IT and ITeS sector – companies and consultants. Why IT? It’s one of the fastest growing sectors in the country, which means it is also one that is facing increasing risks. The recent India Risk Survey 2018 reveals, “Information and Cyber Insecurity remains at the top of all the risks”. A detailed report by EY seconds this with numerous instances from India related to data theft, intellectual property infringement fraud, and misappropriation of funds, among others. It’s happening to a lot of companies, big and small, and it can happen to you as well!
IT and ITeS sector
Services and businesses in India are moving towards digitization at a rapid pace. While it is a step towards advancement, it also brings increased risks to data. The IT and ITeS sector includes companies that function in the domain of software development, web application, ERP implementation, product and service delivery, IT consultants and related services. As the nature of business differs, the risks that accompany it change. The risks could be:
- Data theft, phishing, hacking
- Compliance and regulatory incidents
- Cyber infrastructure attacks
Insurers solutions to IT and ITeS insurance needs
Insurers understand that with the incorporation of IT, businesses and operations have become more complex. They are now more layered unlike what they used to be a few decades ago. The insurance industry has responded to these needs:
- Insurers know that the evolving range of risks requires specific insurance.
- A predetermined product based on assumptions does not suffice the needs of different IT businesses.
- Insurance propositions need to be tailored according to actual needs such as the complexity of a business, third-party supply chains, and the extent of virtual layers, among other factors.
- Every component of a business needs commercial insurance.
- Businesses that are growing might need thorough realignment of insurance portfolios at intervals in order to safeguard the business.
- Moreover, with high levels of competition in the insurance industry, insurers know that they need to be on top of the game when it comes to customer service – from risk advisory, insurance solution, servicing claims to portfolio management for customers.
Key insurance for IT sector
Let’s look at some specific examples of IT-related incidents and the types of insurance that could come to the rescue in these situations.
1) Professional Indemnity Insurance (Errors and Omissions Insurance)
Example 1: There was a case of data theft at a Gurgaon-based BPO. One of the employees of the company is believed to have sold confidential data to some customers of a British bank. The bank came to know about this and sued the BPO for data breach.
In the above case, Professional Indemnity Insurance (also known as Errors & Omissions Insurance) was useful to the BPO. Professional Indemnity Insurance can be useful in cases that involve intellectual property rights, instances of project delays, revenue loss to customers due to the negligence of a service providing company, product liability, loss of data, and breach of contract or confidentiality.
It seldom happens that deadlines are not followed and certain projects get delayed. A delay could potentially make a client lose their revenue and additionally it might be a breach of contract. In order to avoid a heavy loss to the company, IT companies prefer to purchase the Errors and Omissions Insurance.
What does it cover?
It covers all the legal aspects of the situation at hand. The Professional Indemnity insurance takes care of everything from legal fees, to the judgement and settlement costs.
2) Commercial General Liability Insurance
Example 2: An IT company in Bangalore, located in a plush IT park had invited a group of college students for an interactive learning experience as part of their CSR activity. At the same time, the office was undergoing renovation work, too. A few of the students got injured when a scaffolding inside the office fell on the students. The parents of the students collectively sued the IT company for the bodily injury caused to their children. So you see, IT companies and for that matter, companies in all kinds of industries, can face several kinds of risks.
In the above scenario, the Commercial General Liability (CGL) coverage came into play. The CGL The legal document issued to the policyholder that outlines the conditions and terms of the insurance; also called the ‘policy would provide coverage towards legal fees, judgement and settlement costs that could include expenses such as the repair of property damage (to a third party), medical and hospital expenses of an injured person, and claims against psychological damages faced by the third party, among others.
What does it cover?
It covers all the legal aspects of the situation at hand. This will help your business to avoid all legal expenses that circumstances can entail.
3) Cyber Liability Insurance
Example 3: A Hyderabad-based software services company’s employee managed to steal the company’s accounting system password and embezzled US$ 2 million from the account of one of the company’s clients. As a result, the company had to shut down the entire online accounting system temporarily, which resulted in a loss of revenue. Apart from that, the company’s client filed a lawsuit in order to recover the amount lost. In this situation, the company’s Cyber Liability Insurance helped. The first-party coverage compensated for the loss of revenue and the third-party coverage compensated for the legal settlement costs.
The biggest risk in an IT firm is that of data. If the data is leaked, and the privacy of your clients or even worse, their customers, are compromised, the repercussions can be severe for the client – loss of customer trust, negative press coverage, loss of possible business for starters. In this scenario, the IT firm will definitely be sued by the client, seeking compensation for the damages they have suffered.
In the IT sector, there is always a privacy risk that could potentially cause business losses due to a cyber attack. Such scenarios can only be made easier on the company with the help of the right insurance.
What does it cover?
The coverage of this insurance includes data recovery expenses, legal fees, settlement costs, and the loss the company suffers due to unforeseen circumstances.
4) Group Health Insurance
Example 4: Few employees of a Pune-based BPO fell ill because of eating poisonous food at the cafeteria of the company. The employees were rushed to the hospital in time and given treatment. At such times and at any time when the employees of a company incur hospitalisation or media expenses, the health insurance provided by the company for its employees can be utilized.
Group Health Insurance is provided to the employees of a company by the company. There are different kinds of policies under health insurance, of which the most usual are: health insurance that covers the cost of treatment for illness and injury; Any Unforeseen and unanticipated event is considered an accident. insurance that covers death, disability and loss of income arising out of an Any Unforeseen and unanticipated event is considered an accident., and term life insurance that pays a lump sum amount in case of death due to any reason.
Investing in the right policies will not only help your company grow, but it also enables you to manage the risks and hurdles that are often faced by IT sectors, with ease. Mistakes are bound to be made if there are employees involved. The best one can do is aim to create a stable work environment by shielding your company using the right insurance policies, tailored to fit. The financial and mental stress that all catastrophes bring cannot have a number put on them. They can potentially cripple your entire venture if you are left alone to deal with the hardships. The aftermath of incidents is reduced exponentially by investing in the right insurance that fulfils all that your business requires. Do not delay the process of ensuring your business, because disaster can knock on your door any time.
IT-related risks can be faced by all kinds of businesses that rely on digital processes and technology. Hence, insuring your business against these risks is essential. To further learn about the different kinds of insurance that can safeguard different components of businesses in the IT sector, visit PlanCover’s website. We have developed a number of key solutions to IT sector-specific risks and challenges of insurance.