One of a kind

From software developers to online casinos, the technology sector offers ample opportunity to brokers that are prepared to look closely at the niche requirements of each company, writes Graeme Newman

Technology allows mundane tasks to be automated, processes to become more efficient and money to be saved. It has also radically changed the way business is conducted, and has opened up a new world of entertainment and information provision. In fact, so much of the way people live today is shaped by technology that it is hard to imagine how they coped without it.

There are countless examples of how technological solutions have infiltrated everyday routines. For example, airlines allow you to check in and choose seating positions online, and in-house flight entertainment provide movies from take off until landing. You can also keep in touch with the football score from a mobile phone while waiting to go through immigration.

But it is not all plain sailing - when things go wrong, as they invariably do with these systems, critical processes can come to an abrupt halt and can have dramatic consequences. For example, the online check-in system stops working, resulting in queues of angry holidaymakers waiting in line, or the automatic baggage system inadvertently redirects the luggage to the wrong destination. Meanwhile, your football scores come through incorrectly, prompting you to place an ill-advised bet and squander your hard-earned cash.

When technology fails, our lives grind to a halt and businesses lose money. In today's litigious environment, this will almost inevitably result in a lawsuit. So, for the insurance industry, the influx of technology offers a significant opportunity - but the difficulty lies in how to meet this challenge.

A key difference

Unlike traditional professions such as accountants, architects and engineers, technology is a hugely varying industry. A wide range of companies operate in this sector - from software developers and consultants to computer games developers and online casinos - meaning that one standard policy wording cannot fit all. To be successful, brokers and insurers should cease to consider technology as a class on its own, but instead look to the specific sub-sectors within it. Each has it own particular way of working and different exposures, so the key is to target each group individually.

For example, compare the risk profiles of three major companies: Accenture, Facebook and William Hill. The first supplies services in relation to large-scale software implementation, while Facebook allows users across the world to share profiles, pictures and stories. The third allows people to place bets online and gamble against other players. All fall under the technology banner but operate very differently, and they have all recently faced markedly different high-profile legal challenges.

Accenture was sued by Centrica for £182m after the alleged failure of an IT system. Facebook was challenged by Hasbro and Mattel for allegedly infringing their proprietary rights over the online application Scrabulous, after a user distributed it across the network. Meanwhile, William Hill was sued by a punter who accused it of failing to implement his self-exclusion request, allegedly causing him to lose a large amount of money from bets he believed he should not have been allowed to make.

This is just a handful of examples of the different ways companies are using technology and where exposures have arisen. In addition, the technological landscape is continually changing with the increase of regulatory and contractual requirements, the maturing of existing applications and the development of new ones. Consequently, it is essential that brokers and insurers alike understand the different risk profiles of the individual groups within the technology sector to avoid providing the wrong cover or writing inappropriate risks.

Providing each sub-sector is treated as a separate class and brokers and insurers understand the nuances of doing business within it, the possibilities are endless.

Graeme Newman is business development director at CFC Underwriting.

EVOLUTION OF A SCHEME - CFC UNDERWRITING

CFC Underwriting is a niche insurer specialising in the technology industry. With its eye trained on new professions within the field, it recognised a need among mobile content providers for professional indemnity insurance that conformed to their unique business model. These providers tend to be small and established within the past five years, and with relatively modest financial standing. Their customers are the giants of the mobile world - the networks - which posed a David-and-Goliath scenario when it came to insurance.

The networks were insisting that the content providers had insurance or they would not trade with them, and insurers, on hearing which firms they could potentially be wrangling with should things go wrong, were demanding premiums far above the level that these start-ups could afford.

In response, and as an example of the possibilities within the technology sector, CFC launched Mobisure - a scheme that enables mobile content providers to trade with networks on a footing with which they are both comfortable. It allows the use of high-profile brands and worldwide distribution, with an extension that automatically indemnifies the distributors of their content and the mobile network operators from claims for intellectual property rights infringement.

The message to brokers is that they should now be able to confidently tap into this market - mobile content provision is a sub-sector of technology where there is a high volume of new insurance buyers, with the market estimated to be worth £15.5bn and rising.