Insurance for Technology Companies
Technology companies vary widely with regard to their scope of work and IT services. Some IT businesses install and maintain computer hardware such as servers and desktops. Other firms provide additional services such as web design, hosting, Internet access, custom programming. system back-ups, updates, software solutions, and more.
Software developers and system designers of customized products are specialized consultants. They analyze their clients’ hardware or software needs, work closely with the clients’ internal computer staff and end users, and develop the final product. They may also advise or arrange for the purchase of the appropriate hardware, networking peripherals and other similar items.
Recommended Business Insurance Programs for I.T.
Minimum recommended coverage:
• General Liability
• Tech Errors and Omissions (Professional Liability)
• Commercial Property Insurance
• Hired and Non-Owned Auto (full commercial auto if vehicles owned)
• Commercial Crime or Employee Dishonesty
• Extra Expense with Business Income Coverage
• Workers’ Compensation Insurance
Other coverages to consider for Tech Firms:
Business Personal Property, Equipment Breakdown, Computer Fraud, Employee Dishonesty, Accounts Receivable, Computers, Valuable Papers and Records, Employee Benefits Liability, Errors and Professional Liability, Umbrella Liability, Computer Fraud, Forgery, Employment Practices Liability (EPLI), Directors and Officers Liability, Commercial Auto Liability and Physical Damage (if vehicles owned).
Common Risks and Needs Associated with Technology Businesses
General Liability Insurance
Premises liability risk is minimal to moderate. Many IT services are often conducted on clients’ premises and most client contact is electronic, phone calls, or by mail. Exposure at a repair shop can increase premises exposure if customers visit the premises or are permitted in the repair area.
If the IT company conducts repairs at the customer’s home or place of business, repair technicians should be trained in proper procedures to prevent premises damage such as fire while working on faulty appliances. Off-premises exposures arise from sales visits, training sessions, and installation of software or hardware at the customer’s premises. There should be policies and training regarding acceptable off-premises behavior. If the developer works on the client’s computer, the client’s property could be damaged, either the actual hardware or by corrupting code on the existing software.
Completed Products liability risk is not normally high. However, use of faulty components or improperly repaired hardware can cause electrical problems that could result in fire or other property damage. Employees should be trained in proper repair procedures. Improper work can nullify warranties and transfer the responsibility for properly working products from the manufacturer to the repair operation. The products liability exposure will increase if used and refurbished items are sold. If the operation performs any type of software design, the type of software designed may result in a professional liability exposure (Tech E&O).
Technology Errors and Omissions (Professional liability)
Professional liability and errors and omissions exposures are extensive for most technology companies, but vary by the type of software and its intended use. To fully evaluate the potential risks, it’s important for agents and insurance carriers to understand the types of programs that are being developed. The more essential the software is to the business’s operation, the more serious is the errors and omission exposure as there may be long-term consequences for software failure. It is important to know what the software controls within the business. If it is designed to provide safety services, the situation might be more serious than for a more mundane usage.
Errors and omissions exposures for website designers is extensive. Designers are often responsible for content and must meet the requirements of the client. A potential for lawsuits is created by inaccurate information on the client’s website, improper handling of product data or customer purchases, customer financial data, and errors that misdirect the client’s potential customers. E&O Liability is substantially greater if the designer does not keep detailed records of agreements with clients and documentation of client approval at each stage. A Web developer has a responsibility to control access to the clients’ private information, made more difficult by the extensive use of laptop computers, as well as very small storage devices. Copyright violations can result in substantial damages.
The more essential a software is to the client business’s operation, the more serious is the errors and omission exposure. Programmers and developer are always responsible for the fitness of a product for its advertised use and stated compatibility requirements. Failure of cheap recreational software to perform will not result in serious loss, whereas failure of software designed to manage medical records could have serious consequences. Hazards are substantially greater if the developer does not keep detailed records of testing and research.
Property exposures for Tech Companies generally consist of an office operation, as well as any incidental storage and areas for service work on computers. The primary hazards arise from the high concentration of servers and other electronic equipment. Ignition sources include wiring, wear, and overheating of equipment. Fire, smoke, and water can cause significant damage to equipment. Fire protection should consist of chemical applications instead of water. Although computer equipment can be included as part of the business personal property coverage, more complete protection is available under a specialized computer or Electronic Data Processing (EDP) policy.
A detailed emergency plan should be in place since downtime is not an option. Extra expense coverage is needed more than business income due to contract deadline dates, and should be purchased as a part of any EDP policy. Some coverage may be needed under the property coverage if there is building coverage or significant non-computer-related business personal property.
Business Personal Property exposure often depends on the value of computer components kept on hand to make repairs. Computer repair may include the use of flammable cleaning solvents, soldering, electrical wiring, and repair of plastic cabinets. Flammables and combustibles need to be used away from soldering operations. Solvents should be properly stored in fireproof cabinets or rooms. Theft can be a concern with target items such as computers. There should be alarms, locks, and other controls to prevent unauthorized access to an IT facility.
Commercial Auto Insurance
Automobile exposure is typically limited to hired and non-owned coverage. There is extensive off-premises work by the employees of various departments (sales, programmers, technicians). Full auto coverage is needed for Tech Companies that have a fleet of private passenger vehicles. They may also require that employees use their own vehicles, or may use rental vehicles. If vehicles are provided to employees, there should be clear procedures in place regarding personal use by employees and their family members.
Commercial Crime Policy
Crime exposures for IT companies typically arise from employee dishonesty and computer fraud. Developers may occasionally have access to private financial information of their clients, especially for billing purposes. Such lists represent a target item for identity theft. Hazards increase in the absence of proper monitoring of the insured’s staff who may have such access. Background checks and previous employment verification are important prior to hiring.
Inland Marine Coverage
Inland marine exposure includes accounts receivable, computers, and valuable papers and records. A computer or EDP policy is a better form of coverage since it includes not only the hardware but also the software and the media. There should be frequent backup and off-site data storage. If the IT business will have care, custody, and control of customers computers and hardware Inland Marine coverage with Bailees customer coverage is a good option.
Many software developers work at the client’s premises, presenting transit and off-premises exposures. There is a high risk of theft, both of portable hardware such as laptops and handhelds and of the software programs. Extra expense is an important option to purchase because of the need to quickly return to operation after a loss and meet contractual obligations. Information used to document the programming is not software and must be insured as valuable papers or its digital equivalent. All contracts, documentation, software design, copyrights and patents, on paper, disks or other media, should be duplicated and the duplicates should be kept off site.
Workers compensation liability risks are typically that of an office, although there may be significant off-site work. Concerns include eyestrain, neck strain, carpal tunnel syndrome, and similar cumulative trauma injuries that can be addressed through ergonomically designed workstations. Back sprains and strains can result from lifting and other material handling injuries if the there is any moving of computers or related equipment.
Business Liability and E&O Quotes for Technology Companies
General Liability Shop.com offers a free IT analysis of your firms risks as well as affordable liability and Tech E&O insurance quotes for Technology and IT companies throughout the U.S. Our Tech Insurance programs include all lines of business insurance, as well as our Target programs for business owners policies (BOP), and Commercial Packages. Contact one of our Technology Insurance Specialists today at (800) 900-8657, or start a Tech Insurance quote online now.
Our Top Carrier Solutions for Technology Companies
IT and Technology Liability Classification Codes
Commercial insurance companies use various liability classification systems in order to classify and rate coverage premiums and costs for Technology insurance. There are numerous liability classifications since Tech Services vary significantly. Here are the most common business insurance classifications for IT Companies:
Business Liability Category: Information Technology Service Businesses
SIC Business Insurance Codes:
• 7378- Computer Maintenance and Repair
• 7379- Computer Related Services
• 7374- Computer Processing and Data Preparation Services
• 7371- Computer Programming Services
• 7372- Prepackaged Software
• 7375- Information Retrieval Services- Internet Service Provider
• 5045- Computers, Peripheral Equipment, and Software
NAICS Liability Classifications:
• 811212- Computer and Office Machine Repair
• 811213- Communication Equipment Repair and Maintenance
• 518210- Data Processing, Hosting, and Related Services
• 541511- Custom Computer Programming Services
• 511210- Software Publishers
• 517110- Wired Telecommunications- Internet Services
• 517210- Wireless Telecommunications- Internet Providers
• 334614- Software and Other IT Equipment
Business ISO General Liability:
• Code: 91551- Communication Equipment Installation
• Code: 43151- Computer Data Processing
• Code: 41675- Computer Consulting or Programming
• Code: 51942- Computer Software Manufacturing- Pre-packaged
• Code: 96930- Website Designers and Programmers
• Code: 47600- Internet Access Providers
Common Workers Compensation Class Codes:
• 5191- Office Machine Installation, Service, and Repair
• 8803- Computer Systems Programmers- Traveling
• 8810- Clerical, Software, Programmers, Office Employees
• 8742- Outside Sales and Messengers
• 8901- Telecommunications Office
• 8859- California Only- Computer Programming and Software Development