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Technology Insurance Costs Fall While Risks Rise
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A softening market has seen the price of insurance limits in the technology, media and telecommunications (TMT) sector drop by almost 20% in the past two years, according to Marsh, a risk and insurance services firm. A new Marsh report, surveyed 144 TMT companies across Europe and found that companies are not taking advantage of the softer market to purchase greater coverage, despite rising risks.
The firms benchmarked in the UK purchased €53 million in limits on average, while the median was €36 million. This differential may be attributed to the larger firms in the survey buying higher levels than their peers, suggesting a lack of awareness by the middle market sized firms on their liability exposure.
Fredrik Motzfeldt, European Leader for Technology, Media and Telecommunication at Marsh, said: "Many companies are not taking advantage of the low price of limits, despite the new risks the sector is facing. The technology, media and telecommunication sectors are all converging, and previously unanticipated risks are beginning to materialise. In an era of convergence, it is prudent for firms to assess all their exposures on a rolling basis."
Mr Motzfeldt said: "Customers are increasingly asking their suppliers to have professional indemnity insurance in place in case a virus is passed to them from a product or service. New electronic liability policies are not restricting coverage yet, but it may only take one successful litigation. An increased demand for cyber risk insurance cover and risk management services is likely in the next 12 months."
Mr Motzfeldt said: "Costs will need to be cut in some areas, such as components, which will create a higher vulnerability in the supply chain and possibly create a cyclical pattern in recalls. Cost cutting could create unsafe products causing a recall, which in turn elevates overheads and means greater pressure on cost cutting. The cost of recent recalls of overheating computer batteries and their effect on a company's stock price highlight just how great the risks can be."
Having a consistent approach nationally and internationally is important to reducing liability exposure. With the fast moving pace of the TMT sector, companies must review their exposures and adjust their cover to meet the changing environment they operate in."
Tags: [virus] [batteries] [insurance] [pace] [era]
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