How to Get Insured as an Independent
With data security breaches, PDA service outages and software glitches making headlines, IT professionals are on the other end of a lot of pointed fingers. This is a good time to be an independent, to be free of a corporate infrastructure that might hinder technological advancement or hide when sensitive information is exposed.
But the IT sector and its professionals face more liability challenges and lawsuit exposures than ever before. As an independent, that makes business insurance all the more necessary. Technology insurance, including specialized policies for software developers and computer consultants, can protect independent practitioners from intellectual property lawsuits, as well as personal injury claims that involve privacy issues and computer virus attacks.
Loretta Worters, Insurance Information Institute vice president of communications, said the challenge for independent IT professionals is in protecting themselves from risks to their business and to their clients.
“Technology errors and omissions (professional liability) insurance protects a company for claims alleging you’ve made mistakes or been negligent in providing products or services,” she said. “Many companies offer this type of coverage, which applies to all of your products and work. Due to the litigation risks, the professional liability policy offers the most important protection for information technology professionals, as their biggest risk exposure is the resulting economic damages from their negligent acts, errors and omissions in the services they provide.”
Depending on your typical client, this coverage can run as little as the low four figures, said Adam Sills, lead underwriter at Darwin Professional Underwriters, a specialty insurance company that offers technology-liability policies. An exposure limit of $500,000 or $1 million might suffice for many independents with small and midsize companies among their customer bases.
For practitioners with technicians on staff, who have rapidly expanding responsibilities to large client companies, who work in highly regulated industries such as financial services or who have sophisticated products and services, a $5 million or $10 million limit might be more appropriate. Policies of this size are more difficult to obtain, however.
Sills said there are two types of IT practitioners looking for insurance. The first is independents who don’t think they need insurance, but whose client requires they have a policy, look for coverage of minimum exposure at the cheapest price. For these, a mainstream professional liability policy is enough.
For the independent IT pro considering more specialized coverage, Sills said this is the best time to be shopping because underwriters are offering targeted products not only for tech errors and omissions but for misuse of intellectual and cyber property (electronic content), identity theft and exposures such as malicious codes, hackers, intellectual property theft and network failures.
“The first thing you want to do is get a licensed agent or broker,” Sills said.
Although this is a boom time for underwriting of solo IT practitioners, he said finding the companies that offer tech policies is best left to a well-connected insurance salesperson.
Worters suggests using trade associations such as the Information Technology Association of America as a resource, as well, because they often offer group insurance discounts.
Insurance isn’t required by law, but you risk a lot by not taking policies. Technology insurance covers the failure of hardware or software products or services provided to clients for key business functions such as office automation, database management, word processing, intranets, e-commerce, and accounting and billing.
Such problems can result in critical mistakes being made, as well as lost income, litigation and business failure.