Computer Engineers Professional Indemnity Insurance
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The need to keep pace with change has driven all modern day organisations to use increasingly complex technology for their business solutions. Their reliance on these systems and services means bigger problems – and bigger claims against the providers. Professional indemnity claims against computer engineering firms range from hundreds to millions of pounds, and professional indemnity insurance is there to provide them with vital protection when things don’t go according to plan.
Computer Engineers Professional Indemnity Insurance Policy Highlights
Why Do Computer Engineers Need Professional Indemnity Insurance?
The need to keep pace with change has driven all modern day organisations to use increasingly complex technology for their business solutions. Their reliance on these systems and services means bigger problems – and bigger claims against the software providers.
Professional indemnity claims against computer engineers range from hundreds to millions of pounds, and professional indemnity insurance is there to provide them with vital protection when things don’t go according to plan.
Professional indemnity insurance covering computer engineering is a complex area and getting it right is important if you want to secure the best premium and more importantly, the correct policy for your type of business. Just because a smart looking policy document might say ‘Professional Indemnity Insurance for IT Firms’ on its cover, it certainly doesn’t mean it’s suitable for every type of IT and Software business.
How do Professional Indemnity insurers view the IT industry?
Professional indemnity insurance cover is necessary for computer engineers and it should be borne in mind that, because of the reliance many firms place on IT systems, the potential losses incurred by businesses may far exceed the cost of the IT project itself, and limits of indemnity need to be set accordingly. IT companies and the services they offer are not easy to categorise, largely due to the wide range of business and industrial environments in which IT professionals work.
Broadly speaking, work carried out by IT companies falls into one or more of the following areas:
- Packaged hardware/software provision
- Development of bespoke solutions
- Consultancy/project management
- IT recruitment
- Internet service providers
What do Professional Indemnity Insurers look for?
The central question is what would be the immediate financial and other consequences if data is incorrect or a system fails or becomes unavailable for any period of time. A lot depends on the precise function of the software and what commercial application it is being used for.
The main areas that give rise to litigation against IT companies are:
- Failure of the software/system to do the job for which it was intended (fitness for purpose).
- Failure to deliver the system on time.
- Failure to deliver the system to budget.
These can give rise to three types of claims:
- Client withholds or claims for return of the purchase price/fees paid
- Direct financial loss arising from the negligence of the IT Company
- Consequential loss
Insurers’ first line of defence is the written contract between the insured and their client. Insurers will often ask to see the insured’s standard terms and conditions. If smaller IT firms are asked to sign onerous contracts with larger customers it is important for the insured to understand the extent of cover offered to meet these contractual liabilities. Whilst cover for the first two types of claims mentioned above are available in the market, insurers expect that consequential losses will be excluded by the insured in their contract terms and conditions, or at least limited.
The prime underwriting criteria is of course what kinds of systems an IT professional is involved in. Areas that must always be disclosed to insurers include:
- Systems in the financial sector
- Games development
- Trading systems
- Process control systems
- ASPs (Application Services Provider) or ISPs (Internet Services Providers)
- Managed Service Providers
- Enterprise Resource Planners
- Large contract sizes
- Mission and safety critical systems
- Cases with US exposure