Insurance for Internet of Things companies

Reliance and litigation. Clients put more reliance on your software and services than ever. Secondly the UK is more litigious than it has ever been, following our peers from across the pond. Insurance is designed to safeguard your business if things go wrong. It will provide legal protection and also compensation to your clients if it is judged you are liable for any errors or downtime. If designed and purchased correctly it will protect your balance sheet.

• Professional indemnity insurance – We would argue this is crucial. It will provide protection for claims against you by clients and in some cases other third parties. It will also cover the legal costs associated with defending your Internet of Things companies in respect of those claims.
• Cyber insurance – Whilst cyber insurance is the buzz word, it’s importance should not be underestimated. If some of the world’s largest companies can be hacked, sadly the ‘it will never happen to us’ approach is no longer valid. As an Internet of Things company you will know IT security better than most, but as we know, our biggest risk is our people/employees, and it only take a small oversight for your systems to be compromised. Having access to specialist support in the event of a cyber-attack from companies that handle such attacks every day can be crucial to getting your business back on its feet with haste.
• Public and product liability – covers physical injury and damage, which arguably is unlikely for clerical businesses, but can be added to packages with ease and at a low cost
• Employers’ liability – this covers injury claims from employees, it’s legal requirement in the UK is you have employees. Again, easy to add and typically low cost.
• Computers, laptops and office equipment – it’s easy to insure you IT assets from theft and destruction. The coverage for portable IT equipment can also be offered on a worldwide basis.
• Directors’ and officers’ insurance –covers claims against directors or senior managers made in personal capacity. Particularly relevant if you have external investors who may attempt to hold company directors liable for failures within the business or a missed ROI targets.

The most common claims we see against Internet of Things companies are related to:

• Breach of contract – allegations the software fails to meet the contractual provisions, including matters such as missed deadlines, non-compliance, non-performance and failure to meet uptime requirements.
• Cyber-attacks – be it a cyber-attack on your own system or cyber-attack on the clients’ systems where they argue you are responsible for IT security.
• Counter claims and tactical litigation – we are seeing an increase in claims made, which some may argue are tactical in nature or simply a symptom of the economic environment. If a business which is a client of yours cannot afford to pay their bills and/or is having cash flow difficulties, and alternative option to paying those bills may be to make unfounded allegations your Internet of Things business has been negligent or failed to provide a service. This may be with the tactic of getting your business to write off the genuine invoices or reduce them.

• Most policies will exclude claims in the USA and Canada, so be mindful as to whether you permit US or Canadian clients, or sign contracts that are subject to USA or Canadian law. Some insurers will also restrict cover the UK claims only. Policies can typically be easily extended to include USA and Canadian courts protection for an additional premium.
• Patents – it unusual for software to be subject to patents, but mindful that patent related claims from third parties are often excluded.
• Deliberate acts, dishonest or fraudulent acts are usually excluded unless committed by an employee without the knowledge of senior management.
• Commercial disputes – disputes which are purely commercial in nature and not linked to your supply or service provision. For example, a commercial dispute with a supplier. Disputes with client are usually covered especially if they allege your business has been negligent or breached a contract

Here’s a list of some of the software related business activities that can be covered under the software company insurance that we arrange:

• software developers including games and apps developers
• software suppliers, including installation and configuration
• SAAS – Software as a Service
• Software consultants and systems integrators
• Software implementation and project management and/or provision of contract staff