Risk in a digital age

Alan Thomas, UK and Ireland Head of Technology, Media and Telecoms, tells James de Mellow how Hiscox stays at the cutting edge

The digital world and its risks move so quickly that some businesses struggle to keep up with the pace of change. It is difficult for technology or media organisations to be completely sure of the exposures they face and companies that provide data and communications services need an insurer that has the products and claims expertise to meet their demands.

Hiscox is hugely experienced in the technology, media and telecoms (TMT) sector, and was one of the first insurers to write bespoke wording for it back in 1995. Since then, it has made sure that it understands the exposures and issues that businesses face in order to keep its policies up to date.

According to Alan Thomas, Head of TMT at Hiscox UK and Ireland, it is important that policies are representative of the types of claims that insurers have been paying. “When we review our wordings, our underwriters and claims teams work with selected customers, brokers and lawyers,” he says. “The problem with an emerging area is that you see a lot of risk and try to cover as much as possible. In reality, the only time you really know what’s going to go wrong is when you get a claim.

”The success of this method can be seen in Hiscox’s approach to Professional Indemnity (PI) wordings for the technology sector. Standard products for traditional professions usually only cover claims for negligence or breach of a duty of care. Hiscox has allowed technology clients to extend their liability under contract and still benefit from cover under their PI policy.

“This is a key area where our technology and media policies have moved ahead of other parts of the PI market,” Alan says. “In fact, 49% of all claims we’ve paid in the technology sector have come from breach of contract.”

Emerging risks are still important, however, and Alan anticipates continued growth in cloud computing and managed services. Instead of technology firms building a bespoke piece of software for a business, companies increasingly outsource the running of their systems and their data hosting.

“The risk is becoming one of making sure that both data and systems are constantly available and sensitive information is not lost,” Alan says. “Say our insured was managing an insurance broker’s client system, for example. If that application failed and the broker couldn’t use the systems or data for five days, it would likely be a material failing in the services the insured had promised to provide – and that’s where our policy would respond.”

The sector’s best-selling products include PI for technology firms, marketing businesses, publishers and broadcasters. Recently, Alan says, a Hacker Damage module has also been selling well. “It’s something you can add on to these policies to cover your own losses in the event of an attack,” he explains.

There have been a number of high-profile hacking cases in the headlines recently – including the breaches of Sony’s PlayStation Network and the Sega Corporation’s database – that have increased awareness of this risk.

Hiscox is also on top of the convergence of media channels – a phenomenon that means that media and telecoms companies increasingly face technology risks. “For example, a marketing firm would now be involved in search engine optimisation, online campaigns and smartphone apps,” Alan says. “This crossover is good for brokers working with Hiscox, as we have a deep understanding of all these sectors.”

Despite the economic turbulence of the past three years, the TMT sector is doing well, meaning that there are good opportunities for brokers as these businesses expand. “It’s going to be an educational process for clients,” Alan says. “Brokers should be highlighting new risks and showing clients the solutions on offer.

“When brokers have been able to go in and talk these clients’ language – and show their knowledge of typical claims from the sector – it’s made a huge difference to whether the business will buy the product. These companies also tend to grow very quickly, so once you’re in the front door, the repeat business is likely to be very profitable.”