Something rather remarkable has happened to the world over the last fifty years. We started off with mainframe computers that filled suites of specially air-conditioned rooms, moved into systems for linking smaller computers together in networks, and now have portable computers and cloud services. Following this arc has been the decentralization of the IT services sector. In the early days, we were talking about big in-house departments to run the computers and write the software. If outside experts were to be called in, they were usually run by the manufacturers of the hardware or they were quite large organizations.
When the hardware was distributed to individuals in their offices, smaller support groups emerged. Now we are into a different world in which a handful of developers can set up to build their own software packages or apps to be marketed directly to consumers. To get started, all they need is the ideas, reasonably powerful laptops and cloud services. If the product sells in sufficient numbers, that’s the time to start thinking about getting more professional, i.e. getting an office, employing staff, and so on. Inevitably, someone will ask about insurance. Here are a few issues to consider.
Let’s take the worst case scenario. A year or so after your launch, someone makes a claim against you alleging loss or damage caused by their use of your software product or app. It turns out this company or individual has been using your software in a way you had not considered. Perhaps no-one would seriously have predicted this particular use of the software. Yet here comes the claim and there’s no doubt that financial loss has been sustained. It’s wonderful when you can hand over the defense to highly competent attorneys paid by your insurer. So when you are looking round for that essential insurer, can you find expertise and experience in covering the technology industry? No matter how good an insurer may be in shielding retailers and distributors, you will potentially lose out unless the cover is tailored specifically to your needs. This does not just mean liability cover. Small business insurance should always include professional liability cover as well. That way, if the allegation is not that the code itself caused loss, but the software was misdescribed and does not work as advertised, you are still covered.
Then we come to the key issues. Does the insurer cover you for the code already written? All products have a life-cycle. Some are simple apps, others are complicated packages. You do not want a one-size-fits-all approach to your insurance. You want confidence whether the code is already out there or is still going through development and testing. Given the internet facilitates international trade, you also want a carrier that offers cover outside the jurisdiction. Just because you are small does not mean most of your sales are not international. Small business insurance is essential. Get it right!