IP insurance: The next cyber?
The CFC Summit 2019 brought some of the industry’s top thinkers, innovators and creators together for a jam-packed day of sessions on the future of insurance.
At the event, Nigel Swycher of analytics company Aistemos spoke about Intellectual Property Insurance, asking the big question: is IP the next cyber?
As founder and CEO, Nigel is an IP veteran and recognized by the IAM Strategy 300 as an expert in his field. Prior to Aistemos, Nigel had an extensive legal career and led the intellectual property practice at leading law firm Slaughter and May.
At the CFC Summit 2019, Nigel Swycher discussed the serious exposure of many businesses surrounding intellectual property, and the huge opportunities that the insurance industry is missing. The session ended with a brief Q&A, in which members of the audience were able to ask about some of the biggest issues affecting intellectual property insurance today.
Let’s take a look at some of the questions that were asked and think about why intellectual property is still so massively under-insured.
What is main barrier we need to get over to make the IP insurance market more successful?
One of the crucial issues affecting intellectual property insurance is awareness. As a class of business that is new to some brokers, we are happy to assist with information for anyone that is unsure how to start the conversation and what is required. Many companies still don’t know about the existence of IP insurance, and it may be overlooked when brokers discuss risks and relevant insurance policies with their clients. Companies may also believe that IP is covered under professional indemnity policies, but that’s not always the case - many media and E&O policies include elements of IP infringement cover, but may exclude certain jurisdictions, types of claims, or IP rights, such as patents.
In order to make IP insurance mainstream, the market needs a good understanding and knowledge about IP and about what cover is available. While awareness of IP is on the increase, awareness of insurance policies surrounding the issue has some catching up to do. Companies need to better understand the products available and know enough about to IP risk to identify potential exposures.
Doesn’t IP suffer the same issue as cyber used to, silent cover under other insurance policies?
Despite both being around for some time, cyber insurance and IP insurance are now hugely different in terms of public awareness. High profile cases surrounding cyber insurance have brought the issue to the foreground, whereas IP insurance remains something of an enigma to many companies.
Like cyber insurance, some IP cover is available as part of many other insurance policies. This can lead to the problematic situation where a client believes that IP risks are covered beyond what is actually the case. While some IP exposures might be included as part of other policies, these policies may well not provide adequate cover for every IP exposure. It is therefore hugely important that both the insured and the broker have a thorough understanding of what is covered and what isn’t when it comes to IP insurance. Armed with a complete understanding of IP and what their existing policies cover, many clients would be looking to purchase standalone IP insurance for complete peace of mind.
How useful is a $1-2mil IP defense policy against a giant tech/pharma company with bottomless pockets?
In all insurance policies, companies should consider what the relevant limit is for their estimated risks. And IP insurance is no exception. If the key risk that a company wants to insure is being targeted by a large pharma or tech company, then a substantial insurance limit is sensible.
Having said that, not all IP or patent claims cost millions and end businesses, but they can be hugely disruptive to SMEs, where cash flow is critical. The legal costs of even the most frivolous infringement lawsuits can still reach the hundreds of thousands, and businesses need to be able to defend themselves and respond properly in order to keep operating. Some infringement actions will of course cost significantly more than this, and that’s why the insured and their brokers should determine potential risks long before a claim arises. Naturally, the company’s budget to spend on insurance also plays a part and the company can consider the likelihood of a risk against the cost of insurance for various limits.
It’s also worth bearing in mind that IP insurance may provide more than just the monetary limit. The support and advice of an experienced claims team can be invaluable to SMEs who are being targeted, helping to keep businesses moving at an incredibly stressful time.
What are your thoughts on the other patent insurance solutions available on the market?
Intellectual property is a complex field, and it is vital that insurers covering IP exposures are able to handle complicated claims. When a small company buys an IP policy they are not just necessarily buying the cover. They are buying access to a claims management team, whose knowledge and expertise might later prove essential to their business. Claims teams covering IP must be fully equipped with the relevant legal partnerships, and able to provide timely advice to clients on all manner of intellectual property issues.
At CFC not only do we have an experienced IP underwriting team who can support brokers with any questions they might have. We also have years of experience in handling IP claims, with a team of dedicated claims handlers available whenever required. Our team manages the financial burden, but we go one step further than that. We also help with strategy and planning, helping clients to achieve the best possible outcome in complex IP infringement claims.