Wednesday 30 November 2022 - Thought Leadership

Don’t Get Left Behind; Your Digital Future Awaits

By James Stretton and Matthew Clayton

In our recent article with Insurance Age, James Stretton and Matthew Clayton, Senior Underwriters – Professional Risks, explore the importance of understanding tech Professional Indemnity.

You can view a copy here or read on for the full version.

PI Tech

Technology has long since become an integral part of all our lives, but as the sophistication of the tech and the speed of development increases, so too does the complexity of managing the risks it creates. James Stretton and Matt Clayton, senior underwriters of professional risks at Tokio Marine HCC, investigate.

Undoubtedly, these technological developments create new opportunities for firms to innovate and grow, but they also create new opportunities for cyber criminals to attack. And every time such a threat is identified and neutralised, another appears in its place – creating real challenges for insurers and brokers alike.

Because in reality, most businesses today carry digital risks, and the number of genuine tech companies trading in all types of technology and services is growing yearly. So, any broker hoping to maintain their foothold in the market must get to grips with these emerging risks.

The most crucial first step in protecting a tech client is  determining whether they are a digital business. At Tokio Marine HCC (TMHCC), where we have been insuring digital clients for decades, and ask ourselves these three fundamental questions about the client at the outset:

  • What do they do?
  • Who do they do it for?
  • How do they deliver it?

These questions will help you understand what you are dealing with and which market to take it to. While most tech firms will be hardware, software, consultancy or service providers, there are various types of firms and ways of operating.

For example, in software, some firms sell ‘off-the-shelf’ products from third-party manufacturers, some sell ‘off-the-shelf’ products they have produced, while others will customise their core platform for a client or even build one from scratch. More regularly, this has become a remote process, where software is delivered and maintained via the cloud as a service (SaaS).  All these scenarios change the nature and severity of the risk – differences that an underwriter must be clear on if proper cover is to be provided. 

Once the basics have been established, then we get into the detail of the risk:

  • Do I understand the functionality of the services?
  • Do I understand the impact of unavailability?
  • Do I understand the project and its complexity?
  • Do I understand the cyber and data exposure?

Understanding the risk is crucial and the truth is, while insurers like TMHCC are well experienced in underwriting tech risks, even our most accomplished underwriters can’t make sense of a tech submission without the right level of information.

The pace of development of technology can be daunting, but we must remember that while our clients are experts in IT, we are risk experts, and these clients are looking to us for solutions to their challenges. If we can’t provide those solutions, someone else will.

The defence against that scenario? Data gathering and diligence. These clients may be complex, but our job is to accurately translate what they do into terms, allowing us to underwrite the risk properly.

For example, we often receive requests for £10 million of cyber cover for a client due to a contractual requirement for a new job. But, when we dig a bit deeper, it becomes clear that what the client needs is £10 million of professional indemnity cover to protect their client rather than themselves. The difference between the two, in cost and cover provided, is significant, so getting into detail is the only way to protect these digital clients effectively.

As a rapidly developing industry, the language used is also developing rapidly. Terminology and abbreviations such as blockchain, Web3, metaverse, operational technology, deep tech, quantum computing, edge computing, SaaS, NFT's, SoC, and IoT are all examples of potentially confusing terms which add to the perceived complexity. There are many ways to understand this language, so don't let it put you off working with these clients. It's often more straightforward than it seems.

It takes time and a willingness to learn, but the more we do it, the more we will find that this strange and complex world is just another part of the economy, an economy we have spent many years protecting.

Digital clients can be daunting – there’s no debating that - but the insurance industry needs to get comfortable with these risks (and quickly) because, with every year that passes and every new firm that establishes, the UK economy is becoming increasingly digital.

The only question the insurance industry needs to ask itself is whether it has the appetite and energy to make the effort required to protect today’s digital pioneers and tomorrow’s UK economy. We believe the answer to that question is ‘yes’, and help is available for those wishing to take the plunge.

Your current and future digital clients are waiting for you to provide the security they need and insurers like TMHCC are waiting to help you provide it. So, what’s holding you back? Your digital future awaits.



The information contained in these articles and documents are believed to be accurate at the time of the date of issue, but no representation or warranty is given (express or implied) as to their accuracy, completeness or correctness. TMHCC accepts no liability whatsoever for any direct, indirect or consequential loss or damage arising in any way from any use of or reliance placed on this material for any purpose. The contents of these articles/documents are the copyright of Tokio Marine HCC. Nothing in these articles/documents constitutes advice, nor creates a contractual relationship.

Matt Clayton
Matthew Clayton

Senior Underwriter

James Stretton
James Stretton

Senior Underwriter - Professional Risks