Our most recent Betterley Report reviews 28 leading Tech E&O products; this is our 14th annual review of this important coverage. New carriers added were Endurance, RLI, and Swiss Re.
Tech E&O may not get as much attention as Cyber/Privacy, but it is an important part of the insurance portfolio of many organizations. With the help of Dr. Fritz Yohn and his team at MarketStance (www.marketstance.com), along with input from carriers, we estimated the U.S. annual premium to be almost $800 million in 2013.
As the tech industry grows, most insurance brokers will have at least some insureds from the Tech industries, and so knowledge of this product and trends in pricing and coverage are much needed. And not only for ‘traditional’ tech companies. There are many non-tech organizations, including not-for-profits, that have substantial Tech E&O exposures. So product knowledge to identify those exposures and to understand the types of coverage that might be needed is important.
This year’s Report found that, unlike most other commercial insurance lines, rates were trending down, although the % was slight. We attribute this to the heavy competition amongst insurers for this desirable type of insured. Loss experience has generally been favorable for many insurers, too, so writing more may seem attractive.
Some of our findings:
Cyber/Privacy Coverage Specifically Added to Many Products – Continuing to support our belief that specific Cyber/Privacy coverage should be considered by Tech insureds (and thus not rely on the E&O coverage to pay for breach events), more carriers are adding Cyber options to their Tech products.
Media Liability a Common Option – All carriers reviewed except one can include a Media Liability coverage as a part of their Tech policy
Increasing Premium Volume as the Tech sector recovers – Although rates are in slight decline, the exposure base increases attributable to the tech sector recovery is accelerating the trend toward higher Gross Written Premiums. However, individual carriers are having a harder time increasing their Gross Written as more carriers slice up the market.
Demand by Third Parties Continues to Drive the Market – Technology product and services providers, the audience for this coverage, is seeing greatly increased demand for proof of privacy insurance by their business partners. These clients are concerned about technology risk, and want proof that their vendors are covered. Proper coverage and significant limits are required by new or existing vendors if they want to do business with many organizations.
We think that this demand will be a strong force in growing the market for Technology E&O products. While historically many technology companies have been reluctant to buy coverage, the demand by clients to buy it or perhaps lose a valuable business relationship will greatly expand this market. As more and more data is held by multiple parties, the desire for protection is increasing—a positive for the market segment.
Increased Interest by Risk Management Service Providers in Supporting Technology E&O Insurers – As in the Cyber/Privacy market segment, risk management service providers are seeing that they can greatly extend their reach by providing their services through an insurance policy. We think that it is a natural fit for carriers to identify quality vendors that can help the insureds avoid data breaches, and to provide cost-effective responses if a breach occurs.