Specifics of Insuring IT/Software Developers in Ukraine
January 22, 2016
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Insurance of IT companies specializing in software development is a large target segment for insurance companies abroad. Nonetheless, companies of this type rarely use insurance products in Ukraine. This article reveals reasons for such state of affairs and dwells on the insurance products most suitable for IT developers.
1) Health insurance
People are the main asset for IT companies. Besides, Ukrainian professionals are known internationally for their high level of expertise. Set of mind, similar to the Europeans’ one constitutes additional advantage due to which European customers are often inclined to give the contract to Ukrainian company instead of Indian one, for example.
There are two types of policies used to provide insurance coverage of personnel. They are corporate health insurance and casualty insurance. Their core difference lies in the following, While the first one is intended to cover medical expenses associated with treatment of various diseases ranging from flu to complicated surgeries, the second one stipulates that certain fixed sum is to be paid upon the particular occurrence (injury or another accident). Both insurance products are essential for an employer. The sooner employee returns back to work from a sick leave, the lesser are company’s losses and the higher is motivation for employees in general.
2) Professional liability insurance
Not only does this product enjoy little demand of IT companies, but also it remains still unknown for many consumers. On the one side, such insurance protects IT developers against possible claims and suits associated with errors in code or final product’s performance. On the other side, it covers possible bugs arising during the product’s implementation process and its further technical maintenance. For example, new product implementation can bring about failure of computer system or faulty financial estimates costing a consumer further losses.
When drafting professional indemnity insurance policy for IT company it is essential to understand possible risks which a client can be exposed in each particular case. If a 10-minute down time can result in multimillion losses, it is crucial to find out what caused a break down – whether it was associated with software bug, faulty settings or operator’s error.
It is reasonable to include your contractors’ professional liability into your insurance policy as well. It may be the case that they will turn out to be the ones who made mistake.
With only few companies in Ukraine offering liability insurance products for IT companies even fewer of them can deliver quality coverage. They are mostly companies partially of fully owned by foreign insurers having access to effective products designed by their parent companies.All of the above considered, it’s safe to assume that IT companies’ professional indemnity is the most complicated liability insurance product. Standard liability insurance policies normally exclude damage associated with IT and computer systems’ bugs from the coverage. If you tailor the regular policy to the IT company’s needs, make sure to make the necessary amendments to the agreement to avoid the ridiculous situation when company specializing in data processing is left without coverage for claims caused by errors in processing data. Common practice often complicate negotiating of the policies’ wordings since it is crucial to know for sure which clauses significantly impact the extent of the insurance coverage, and which of the exclusions can be left intact. With only few companies in Ukraine offering liability insurance products for IT companies even fewer of them can deliver quality coverage. They are mostly companies partially of fully owned by foreign insurers having access to effective products designed by their parent companies. That is why every offer should be looked in closely to make sure they it meets your requirements.
Judging by our experience, IT companies which provide services under contracts with foreign customers are the ones looking for professional indemnity insurance coverage upon the request of their counterparts. It’s a common practice in Europe to have professional liability insurance. Otherwise Ukrainian companies risk being denied a promising contract.
3) Property Insurance
As mentioned before, IT companies rarely have valuable tangible assets at their disposal which can be insured. Insuring premises or vehicles is not that popular. Besides, the sums insured under those policies are quite small. However expensive data centers come as exceptions as their value can exceed dozens of million USD. There are only few of them in Ukraine, though.
How to decide which type of coverage is most suitable for you?
Tip # 1.
If your staff exceeds 10-15 people and you are willing to offer them benefits package which will cost you no less than UAH 3,500 a year for each employee, then health insurance or casualty insurance policies are at your disposal. Should you have doubts which program to choose, do not hesitate to use the services of insurance broker who will gladly offer you several options within your budget.
Tip # 2.
In order to make a right decision whether or not your equipment should be insured, estimate the extent of possible losses which you might suffer if the equipment is damaged or lost. If you are sure your business will not suffer a lot, it well may be that you can do without insurance,
Tip # 3.
You will most probably not insure your professional liability unless you are required to do so by your clients. At the same time you should keep in might that absence of insurance significantly lowers your chances to win a promising contract in the course of a tender held by foreign customer, for instance. Even if you are sure that your product will never bring about any loss to your client, please think of practices adopted in the USA and Canada where law suits are filed for minor mistakes. That’s one of the reasons why minimal premium under professional liability insurance policy constitutes USD 1,500 – 2,000.
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