Many IT companies grow steadily for several years without having the risk and insurance program evolve to match the needs of a larger enterprise. When a company first opens, insurance is one of many simple checklist items: get essential general liability and workers compensation in place. As the business grows and evolves, risks are attended to more on an ad hoc basis than with a strategy or plan in place.
But the risks and exposures that IT companies face are greater and more complex than just a few short years ago. Add a little growth and new services, and that early insurance program can't do what it's supposed to do: protect the business.
We recently were referred to a growing IT company and discovered these 5 areas not attended to, each which could quickly put them out of business, and not addressed in their old program:
- Professional Liability (AKA – E&O) – The advice a professional gives to its customers is very important, and can lead to the clients success, or in some bad cases, its failure. If a client claims the IT Company provided bad advice, or misguided the client, if there are financial damages, the company may be sued. Professional Liability insurance provides defense coverage and judgments the Company/Professional from allegations of 'errors' or 'omissions'. (More)
- Cyber Liability – The IT Company was surely assisting its clients with the creation and setup of servers, phones, computers, Wi-Fi and other services and if the client ever gets hacked and loses sensitive customer information, the IT Company may be on the hook. Cyber Liability insurance protects the IT Company for this exposure. (See: How Target was hacked via it’s HVAC System)
- Business Interruption – If the company’s office was destroyed by a fire or storm and could not operate because its infrastructure (servers, laptops, etc.), the IT Company could lose significant revenue before coming back on line. It may not be able to make its payments for rent, vendor contracts, employee wages, utilities, etc. Adding Business Income coverage protected them for this kind of lost revenue.
- Employment Practice Liability – Termination of a bad employee can create a significant legal threat to any company, not just the IT industry. If the company does not follow the right steps to fire an employee properly, that employee could sue the company for unfair employment practices. EPLI coverage protects companies in this, and other employment events, including allegations of discrimination in hiring and other employment practices.
- Business Personal Property (BPP) – The IT Company had inventory, computers, cable, equipment, and other items that valued well over $100,000 in its office that has no coverage under a 'liability' policy. If the office was damaged by a fire or other event, the company could have lost all the investments in the physical stuff. BPP coverage protects the company’s “stuff.”
Each example above can be mitigated with an organized risk management program in place to help buy insurance smartly. Risk management paired with insurance such as using a good HR partner for hiring and firing can lower your chances of getting sued by a disgruntled employee.
Knowing your true risk and addressing it carefully will help you “sleep easy at night” in case disaster strikes.