How modern tech companies are leaving old insurance policies in the dust

Modern tech companies are moving along at a much faster pace than the insurance policies designed to protect them, says Michael Brunero, head of tech, media and intellectual property (IP) at CFC Underwriting.

“We started to realize the policy that we were originally selling to these clients felt like it was designed for companies that existed 20 years ago, to be completely honest,” Brunero says in an interview with Canadian Underwriter.

Historically, tech and media policies tended to create policy coverage “silos,” or even different policies, based on the various causes of loss. “Was it caused by a tangible product like hardware? Was it caused by software? Was it caused by advice? Or was it caused by some sort of installation work?” Brunero asks. “What loss was suffered? And then [the policies] look at, ‘Was it bodily injury or property damage or was it a financial loss?’ and then try to pigeonhole these through different policies.”

For instance, a tech liability policy developed decades ago focused on whether software was a product or a service. “It feels like 30 years down the track,” Brunero says of the traditional approach. “We don’t need to have that argument anymore. What we really need to do is just figure out a solution that’s comprehensive and makes sense for modern tech companies.”

That starts with a more holistic policy approach.

For example, three decades ago, a company may have only being delivering one piece of software. But a current Internet-of-Things company could use a piece of hardware embedded in software that’s also connected to a platform that’s controlled over the internet. “So, the technology is so much more complicated, yet our policies were designed originally for much more simplistic businesses,” as Brunero explains.

CFC recently revamped and modernized its own policy wordings to get away from the traditional practice of placing exposures into different buckets in separate policies (which may have different wordings from insurers that don’t perfectly dovetail). A client may have needed a cyber policy, a general liability policy to cover intangible products and bodily injury caused by services, and then an E&O product to cover services performed and financial loss.

“Rather than have multiple policies dealing with a client’s activity in terms of a general liability policy and an E&O policy, we’ve basically combined them into one location,” Brunero explains. “So that no matter what the client does, it’s covered under the one insuring clause. You’re not worried about this gap in cover.

“What we really tried to do was produce something that was familiar enough for insurance brokers that looked like what they’d expect, but just much more relevant to the end customer.”

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The main change is what CFC coins as “products-and-services liability.” It’s more like an all-risks policy that also provides broad contractual cover — something that is not always covered under traditional policies and remains one of the biggest drivers of claims. Canadian brokers in particular have been receptive to the new wording, Brunero adds.

The rise of environmental, social and governance (ESG) issues also comes into play as more companies consider or adopt green technologies. One example is solar-powered animal tracking, where tracking equipment is applied to farm animals so farms can keep track of livestock. This equipment is now even being used specifically for endangered wild animals to monitor their numbers and prevent them from poaching.

“I expect that to be a huge growth area for the industry over the coming years,” Brunero says. “I think the reputational aspects will start to play a role as well, as insurers don’t necessarily want to be affiliated with huge polluters.”

The world of entertainment now also looks a lot different, with content creators on Instagram and YouTube sometimes starting their account for fun only to see them evolve into fully functioning businesses, but perhaps without considering all the exposures associated with running an online business.

“[With] a lot of these modern companies, we find there’s a little bit of ‘too little, too late’ involved,” Brunero says. “We’ve seen multiple influencers who’ve come to us after the fact saying, ‘I’ve actually just been sued by a major studio because I published a post which had a piece of music from one of their artists and now I’m being sued.’”

Another common ‘after-the-fact’ claim involves an influencer’s account that has been hacked and the entire business is gone. “We see that happen quite a bit,” Brunero says. “Without a follower base and all your content, your Instagram account isn’t very valuable.”

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