IT Insurance has some unique risk management nuances that should be addressed when designing your insurance portfolio. There are four broad risk management techniques that you can use in your IT company to help reduce your overall cost of insurance. Below we have outlined a strategy that can be used in helping to help minimize your overall cost of insurance.
Avoidance and/or elimination of the risk.
Cost of insurance
Knowing which areas of the technology industry can be problematic for the typical insurance company can save you a lot of money in the long run. Normally the higher priced premiums come from technology products and services that are in the aerospace industry, healthcare industry, banking and financial services industry, and security-related industries. If you are doing just simple, basic hardware and software repair in the human resources offices for their personal computers, none of the above-mentioned industries will adversely affect your premiums. But if you are designing custom software for the aerospace industry the pricing can be almost cost prohibitive.
Minimizing the risk
Negotiating your contracts with your vendors can substantially help in minimizing your overall insurance costs. We have found over the years that most tech professionals tend to just sign the contracts that are presented to them by their vendors. Negotiating favorable provisions within each and every contract can substantially reduce your overall overhead costs, specifically with regard to insurance. If you can negotiate having mutual arbitration provisions, reduced liability limits, mutual hold harmless agreements, and similar mutually beneficial provisions for you as the consultant, you will obtain the best insurance pricing possible. Obviously, common safety practice procedures and best practices policies in place will help in your claims and losses to be at a minimum.
Delegating the risk.
Professional liability
Most IT professionals tend to use subcontractors at some point in the process of delivering their products and services. Requiring your independent contractors and/or subcontractors to have the appropriate general liability insurance, professional liability insurance, and workers’ compensation insurance in place can prevent you from having to provide these coverages for these exposures. Again, having the appropriate legal contracts enforced not only with your vendors and clients but also with your subcontractors will go a long way in reducing your overall insurance costs.
Insuring the risk.
After diligently implementing the first three risk management strategies it is then appropriate to consider whether not you want to ensure the remaining risk exposures. The key at this stage is to make sure that you have chosen an insurance company that has the experience and expertise in providing products and services for the technology industry. IT insurance fits hand-in-hand with the other three risk management techniques. To simply rely on IT insurance to cover all of your risk exposures can be a costly decision. This balanced risk management approach will give you the tech professional, all of the cost savings that are possible when designing your insurance portfolio. If you are not comfortable with designing your own technology insurance portfolio, then you would be well advised to seek the counsel of a trusted advisor who is an insurance broker that has the education, experience, expertise, and the ethics to oversee your plan design.