By: Kobus van Niekerk

The Insurance Industry stands on the brink of substantial growth in the Electronic Equipment Insurance market.

AI, Disruption, and the Changing Risk Landscape

Artificial Intelligence (AI) continues to transform industrial and agricultural operations, bringing new risks, and new opportunities. Consort anticipates a shift from conventional “fire and theft” policies toward more sophisticated Electronic Equipment Insurance, designed for today’s connected world.

The Fourth Industrial Revolution is, in many ways, also a period of industrial disruption - some might even call it the first wave of industrial destruction.

Art and value are disappearing through the reinvention of labour and increasing obsolescence. Articles and materials have a short lifespan and diminish in value as soon as they are replaced with something better, faster and often cheaper. 

The Cyber Loss Limited Exclusion Clause: What It Really Means

While most, if not all, short-term material damage policies, including Electronic Equipment Insurance, describe the nature of the cover afforded, they all contain a universal Cyber Loss Limited Exclusion Clause. In essence, this clause excludes any incident that affects the functionality, availability, or operation of a computer system. It applies - except where there is physical damage to tangible property insured under the original policy. The exception will apply where the physical loss or damage to the tangible property insured is due to an excluded cyber event.

It also excludes any loss of functionality, by whatever cause, of any data, other than physical damage as mentioned above. The costs associated with researching, re-engineering, recreating or assembling such data are likewise excluded.

The exclusion contains various definitions relating to computer systems, data and time elements.

Beyond the Exclusion: What Can Still Be Insured?

Despite the above-mentioned obligatory exclusion, there remains scope to insure material damage to the qualifying equipment, consequential loss, and possible liability exposures. The Electronic Equipment Insurance policy provides indemnity in respect of physical loss of or damage to the property insured. Cover is not necessarily restricted to electronic equipment but may extend to complementary and supporting equipment as well. The insurable property can be broad in scope, potentially including an entire robotic production line of a factory.

Cover is comprehensive, and indemnity is on a “new for old” basis. However, the policy remains subject to average.

Protecting Profit in a Commercial Age

We live in a commercial age. Business, factories, transport and other supporting industries are driven by the returns they generate for the economy. Profits are no less deserving of protection than physical assets. Investors deploy capital with the objective of profit generation, and as we enter the AI era, new risks and perils present themselves. Loss or damage may not always be visible or tangible, yet it can be experienced and understood.

Programs that collapse bring factories to a standstill, whether on or off site. Proximate cause takes on new meaning, and loss of or damage gains new definition.

Extensions, Business Interruption & Comprehensive Cover

Apart from the understandable obligatory exclusions, the scope of an Electronic Equipment Insurance policy remains comprehensive, with exclusions kept to a minimum. The policy can be extended to include reinstatement of data and increased cost of working. These extensions may not always be sufficient; therefore, Consort offers full Business Interruption Insurance with appropriate indemnity periods and time deductibles to suit each client’s needs.

Looking Ahead: Guiding Clients into the New Year

As we enter the new year, keep your eyes and ears wide open, stay connected with your clients, and ensure they share in the right insurance bouquet.