Liability risks for it service providers: thin ice in case of project delays and data loss
Many IT service providers incorrectly assess the actual risks
The IT and cyber insurer Hiscox surveyed small and medium-sized IT service providers. One of the findings: The risk assessment of managers and executives does not match what the Hiscox claims statistics show as actual industry risks.
In other words, IT service providers underestimate what type of claim is most likely to be paid for. In addition, smaller companies in particular are often not sufficiently insured.
Industry risks of IT service companies: Assessment and facts
Here's how IT decision makers saw the risk ranking:
- Data loss due to cyber attack or human error
- Failure of the IT infrastructure
- Project delay, project failure or project termination.
The insurer's claims statistics, on the other hand, paint a different picture of the actual risks:
- Project delay, project failure or project abandonment
- Loss of customer data due to programming error
- Customer lawsuits due to alleged errors by the service provider
Just over 200 managers and senior executives of small and medium-sized IT service companies were surveyed for the study.
Too few IT service providers are insured
Just under 49% of the companies surveyed have IT business liability insurance that covers personal injury and property damage caused by their operations. Just under 44 percent are insured against cyber and data risks. Just under 39 percent have IT professional liability insurance to cover financial losses.
Small businesses in particular often lack operational insurance. For example, only about 22 percent in this segment have taken out IT business liability insurance.
Lack of insurance is also a problem for clients
One must not overlook this: Lack of risk management by IT companies also increases the risk of clients. Finally, there is often a lack of funds to pay claims for damages if the contractor of an IT project is responsible for defects or delays.