Insurers need to consider the impact of technology disruption

Insurers are overlooking the operational disruptions caused by technology outages and software failures, according to Marsh Risk Management Research.

The industry insights company said the impact of downtime can cause significant loss o f income, increase operating expenses and damage an organisation’s reputation.

It highlighted a report by the Business Continuity Institute which claimed that unplanned information technology or telecom outages were the most debilitating source of supply chain disruption for 52% of companies.

The report said: “Cyber insurance coverage is increasingly being seen as a must-have by organisations. Historically, coverage was triggered when insureds were the victims of data breaches or hacking attacks. But as cyber insurance policies have evolved, many now provide coverage for a broad range of technology failures and outages.

“Risk managers need to be prepared to answer questions from their directors and officers about whether the firm’s insurance coverage provides adequate protection in the event an incident occurs. It will be important for risk managers to explain that the rapid evolution of privacy and security risks means that many traditional forms of insurance may not be able to adequately respond to these exposures.”

Marsh claimed any business that assumes it is impervious to technology failure was ignoring a critical risk.