Businesses are being forced to add additional IT buildings insurance to protect themselves against data loss on top of existing cover.
Insurers have become worried that businesses’ increasing reliance on IT means that the cost of business interruption has become so expensive, they could face huge losses if swamped by claims.
>Further reading: What kind of insurance does your small business require?
By asking businesses to take extra IT cover in the event of fire or flood, they hope to build up a war chest against such claims.
Until now, IT outages and business interruption have been bundled with the cost of standard buildings insurance.
In many cases, insurers have traditionally paid out for losses from IT interruption if they result from traditional property damage, such as fire and flood, even though policy documents did not specifically mention them.
The pressure on business owners to take out extra IT buildings cover stems from the Bank of England and Lloyd’s of London concerns about the insurance market, according to the Daily Telegraph.
The BoE’s Prudential Regulation Authority (PRA) fears that vague policies could expose insurers to massive unexpected IT pay-outs, which could do serious financial damage.
Insurers have responded to the PRA’s worries by specifically excluding data loss from flooding or a fire in policies.
Here’s the key insurance cover that your small business needs