Insurance for technology companies is our bread and butter. We know it better than most and over the last few years, we’ve seen significant market disruption.
There’s been an increase in companies that offer very cheap software insurance, but when something is too good to be true, it usually is. And our clients have had first hand experience.
The £13 a month policy
Our monthly premium for software insurance is close to £50, so when one of our clients told us they’d sourced a quote online for £13 a month, we knew something was up.
It can be tempting to go with the cheapest option but as our client found once we got digging, it won’t buy you the cover you need.
Our client, a software company, was buying a policy from a provider advertising cover for software companies. That provider does offer software insurance but the product it was promoting to our client was an off-the-shelf professional indemnity policy designed for consultants.
What was, and wasn’t, covered
The list of scenarios not covered was so extensive it was almost impossible to envisage a situation where it could respond when the client needed it.
In the small print of the £13 a month policy, it stated that “no insurance covers every scenario” which is perfectly true. But what followed gave us cause for concern.
The policy excluded claims under contract or related to breach of contract for instance, but it’s rare that software is ever provided without a contract, a licence or terms and conditions. It meant that any disputes related to the contract, a licence or terms and conditions were excluded. That would have been useless for our client.
In our experience almost all claims in the software or tech sector, will at some point refer back to the terms and conditions, or SaaS agreement. Many large and specialist technology companies back this up with hard and fast statistics.
We’ve seen similar critical exclusions in other cheap products too. Policies for instance that exclude AI related claims, cyber and data claims, all of which are key risks for software companies.
What you should look for
Breach of contract is your top risk and cyber-attacks are on the rise so you need to ensure you have cover for both. Check the exclusions and check them again before accepting a policy.
What’s most important is the quality of the cover. A £5 million professional indemnity policy might seem attractive because it protects a high value, but if it excludes breach of contract, it excludes 75% of all claims. High quality cover of just £250,000 might actually give you better protection.
If you’re not sure, speak to our expert team.
