Articles
Hardware Insurance

In economically troubled times business risks take on increased weight. You need to understand what risk you can transfer and what risk you cannot.

From the perspective of your risk manager's desk, technology manufacturing is changing in both important and subtle ways.

Read more about managing risk in technology manufacturing

Equipment Maintenance agreements are a major expense to every business and very profitable to manufacturers and venders. Experts generally agree that equipment maintenance contracts are mandatory for a smoothly running office.

In the wake of September 11th’s tragedies, insurers are quietly making good on their annual promises to pay losses. Interestingly, all policies exclude war related losses in a very broad way. However, America’s insurers are stepping up to the plate in the biggest way they ever have, declaring these losses as "terrorist acts" and not excluding coverage. Does that affect you? Absolutely!

The whole principle of insurance is to spread the risk among those parties at risk. Even the largest multinational insurance companies use reinsurers to further distribute the loss potential by "laying off" a portion of every account limit. Reinsurers have already suffered significant losses in the past several years. Those costs are passed back to your insurer in higher rates. This will continue in a noticeable way. You will have your chance to help.

As an editorial observation by this author looking back over 30 years of professional work in technology, I am compelled to draw some provocative conclusions. In the old days, when we re-wired boards to run IBM 80-column cards, we'd call Chris when things got tangled up.

The peril of a $70 billion loss to a $300 billion industry has made insurers wary. Today we have the national threat of catastrophic losses due to terrorism. Not since the War of 1812 has the continental United States been attacked within our own borders. Rates and premiums have been actuarially set based upon natural disasters, never the threat of deliberate destruction. But enough of historical perspective.

What do we do?

A word on possible exclusions to your policy. You have been reading in the press about insurers difficulties with terrorism. The World Trade Center tragedy was a $70 billion loss to a $300 billion industry. Insurers can't take too many of those. The federal government is considering being the insurer for terrorism losses, much as they are for flood losses. [The consequences of not having terrorism insurance coverage would be creating ghost towns of America's largest cities!]

What does that mean to you?

Depending on your location and the magnitude of your property values at risk, your insurer may be adding terrorism exclusions to one or more of your policies. We will keep you informed.

Your losses may not be covered. One lesson often learned very painfully is loss of property stored somewhere other than at your office premises.

Technology manufacturing is the backbone of our New England economy. Our Massachusetts manufacturers have long exported nearly 1/3 of our technology products, making Massachusetts an important part of the global economy. Risks of the international marketplace naturally follow.

Products liability cases have become more prevalent in the EU markets, as noticeable shift from the non-litigious culture so long distinct from our U.S. culture. Cases of product performance (Errors & Omission), product safety and worker/employee protections in important overseas markets directly affect our local manufacturers. With overseas markets being seen as a crucial element to local economic vitality, risk identification and minimization is important.

Let's face it, when the winds die down, no company has any business braving the high seas. So, what should you do when bookings are scarce, billings are down, and backlogs are depleted? This captain is scouring his ship from stem to stern.

Indirect income loss from assemblers, shock loss from dropped boxes, or shipping loss even with F.O.B.: understand what the potential problems and solutions are.