Below is a summary of the mandatory and optional insurance options that online IT suppliers should consider when selling software via a UK based company.
Employers Liability Insurance
This insurance is mandatory. It covers employee claims relating to injuries suffered whilst working for you. All businesses in Great Britain (England, Scotland and Wales) who have employees working in Great Britain must have this insurance in place.
Failure to do so could result in a fine of 2,500 GBP per day.
The insurance must be:
- an approved policy;
- with an authorised insurer; and
- provide a minimum cover of 5 million GBP.
Directors and Officers Liability Insurance
This insurance is optional. It covers the liability of directors and specified persons such as CEO, CFO for the way in which the business is run. As directors are personally liable for their acts or omissions, it is advisable that such insurance is put in place to protect them.
Product Liability/ Professional Indemnity/ Public Liability Insurance
This insurance is optional. It covers the liability of the Company to third parties and customers for claims arising out of the activities of the company. Suppliers should take out specialist IT insurance which covers liability for the company’s conduct in providing products and/or services to customers.
Typical risks to be covered are:
- damage to hardware and/or software;
- loss or damage to data or computer records;
- infringement of the intellectual property rights of third parties;
- breaches of data protection law;
- defects in computer programmes;
- physical damage to customer property;
- injury to visitors.
Property Damage and Business Interruption Insurance
This insurance is optional. It should cover property damage including machinery breakdown and business interruption. All leased, loaned and rented equipment used in your business should be covered. The insurance should also cover any customer or third party property that you may use or have access to i.e. servers located in a data centre.
This insurance is optional. It covers losses suffered as a result of a criminal act by an employee or third party. For example:
- contractual penalties payable for an employee’s criminal acts;
- cyber crime i.e. hacking, theft;
- criminal damage; and
- damage to electronic data.
The exact nature of the liabilities to be covered and the level of insurance cover you require will depend upon the type of services and products that you supply, where your customers are based and your business model. For example, if you are a global supplier you will need additional local insurance policies in some markets, particularly in the USA and Canada.
In order to establish your exact insurance needs and level of cover required for each type of insurance you should discuss this with an insurance broker, who can advise on what is “standard” or currently acceptable in your business area.