NIG: SMEs do not have adequate technology cover

A report from NIG says insurers and the business community must work together to make more SME technology risks insurable.

The report, Connecting to the future, says that over two thirds of SMEs are now using broadband and are becoming increasingly dependent upon it. But the report raises concerns that, while insurance can be bought to protect against some of the risks they face, the biggest threat to SMEs’ systems – the behaviour of their own staff – is now a key issue.

The study predicts that insurers will, in the near feature, develop monitoring software that could be downloaded onto a policyholder’s computers and servers. This innovation, the report argues, will be pivotal in the development of more comprehensive insurance cover for SMEs’ IT systems and data.

NIG claims a clear gap has developed between the cover that insurers are able to provide and the types of IT-related risks to which SMEs are most vulnerable. In particular, risks related to the performance and behaviour of staff in relation to IT systems fall outside the scope of most existing policies but are revealed to be major problems for SMEs – for example, a member of staff downloading unauthorised software which contains a damaging virus. This creates a significant pool of risk that the SME community must bear currently.

Key points of the report are:

• One third of SMEs have no specialist IT support or no support at all

• A quarter of SMEs are using consumer-level broadband services rather than business services

• 75 per cent of SMEs have no disaster recovery plan for their data; most have never tested their ability to rebuild their system from a back-up

• 25 per cent of broadband-using SMEs pay for cheaper consumer-level broadband packages rather than more robust and higher priced business packages

• Insurers remain unable to provide cover for risks created by SMEs’ own staff

• Connecting to the future report explains how a huge pool of SME IT risk remains uninsured

• A solution for SME IT risk needs to be found urgently

Commenting on the report, RBS Insurance Director of Commercial Steve Kingshott said: “We now have a considerable pool of small business risks related to technology that are not fully insurable under most SME insurance products. That poses a problem for small businesses and presents a challenge to insurers.

“The insurance industry has to find ways of bridging the gap between where we are today and were we need to be. Small businesses need affordable protection against threats to their IT and data. We hope this report is a first step on the road to developing that cover.”