Retail shops insure themselves against stolen or destroyed merchandise – but if a company’s product is its data and technology services, the risk insurance options aren’t so obvious.
The Travelers Cos. stepped in to offer coverage for small, technology-based companies, said John P. O’Connor, second vice president of Travelers division Select Accounts, partly because more and more such companies are popping up.
“This is an area of high growth right now,” he said.
Travelers’ package, introduced last month, supplies insurance against losses in equipment, data, or lost revenue from hacked technology. The package also includes more typical business insurance elements such as general liability and property damage coverage.
The idea is to tailor a more traditional risk insurance package to the kind of risks computer consultants, software firms or Web site designers might encounter, O’Connor said.
The types of companies identified by Travelers for its new coverage are often as small as one-person operations, but the ceiling for eligible companies is $1 million in payroll or $3 million in revenue. Premiums likewise have a wide range, O’Connor said, but the minimum premium is $500.
Part of the package is up to $25,000 for companies who suffer lost revenue because their Web sites have been shut down by hackers. Many technology-based companies take orders or communicate with customers online, O’Connor said; if a hacker managed to shut down the site, that could result in significant loss to the company.
If hacking – or “electronic vandalism” – affects equipment such as computers, servers or networks and whatever data is involved, companies can get up to $50,000 in coverage.
Yet at least one company that reflects Travelers’ target customer wonders about the usefulness of the coverage.
Local Concerns
Kathleen Roane, executive director of Walker Systems Support Inc. in Farmington, said her company doesn’t have that type of insurance. Instead, Walker has solid IT security, keeps copies of its data and has backup technology in case its primary equipment runs in to trouble.
“There are ways to protect yourself other than investing in an insurance policy,” she said.
Rick Huebner, president and CEO of Visual Technologies Inc. in Hartford, said his company works with clients through its Web site, but a downed site wouldn’t mean lost revenue – it would just force business back into other channels, such as phone lines.
“It wouldn’t cripple our projects,” he said.
However, other companies that lean more heavily on their Web sites might be interested in that kind of coverage, Huebner said.
Like Walker, Visual Technologies has security in place to prevent lost data or time lost because of damaged equipment, including two Internet lines and two buildings with different servers.
“We have fairly elaborate backups,” he said.
O’Connor’s comeback is that no system is failsafe – a secondary server might not work as well as the primary one, or the backup data may not be as complete as the first set. And that, he said, is where insurance provides the safety net.
He pointed out that while Travelers isn’t the first to offer this type of coverage, its emphasis on shut-down Web sites and hacked data makes it stand out.
“Those things are pretty unusual to cover,” he said.
