Author – Kobus van Niekerk

Today most businesses are dependent on information technology/electronic equipment, to such an extent, that they cannot operate without it. Any loss or damage to equipment will have a serious impact on day-to-day operations and consequently, the bottom-line.

Unforeseen events can cause the breakdown and physical damage of installed electronic equipment in a business. It has become increasingly evident that continuous global warming and climate change are resulting in unprecedented natural hazards, such as excessive heat, rainstorms, and severe flooding, with the potential of affecting electronic equipment.

Technology leads the way

The phenomenon of earth warming goes as far back as the first industrial revolution with the introduction of fossil fuels to provide energy. The world only really became concerned about global warming towards the end of the twentieth century, at around the start of the technological revolution. Technology can be defined as the development of machinery and equipment through the application of scientific knowledge.

Complex business networks are at the heart of the electronic industry. Electronic equipment is not only restricted to hardware used in offices but is also used in engineering and applied sciences with the supplementary purpose of retarding or reducing global warming.

Do not get stuck in the conventional

As a result of technology, factories and manufacturing plants are becoming more “computer controlled”. This natural progression urges brokers to review the composition of their clients’ insurance portfolios. It is time to move away from traditional or conventional assets wording to applied electronic wording when drafting electronic equipment insurance policies.

Consort Technical Underwriters restructured Electronic Equipment Insurance (EEI) to accommodate the need to insure highly sophisticated hi-tech and capital-intensive equipment under a comprehensive Electronic Equipment Policy, including electrical and mechanical breakdown, as well as consequential losses following misfortune, because of inter alia, climate change.

Electronic equipment is more than meets the eye

  • Electronic equipment cannot operate without support which is commonly referred to as “software programmes” or “software systems”. Often a software package can be more expensive than the hardware from which it is running. Without electronic equipment insurance, an entity cannot protect this invaluable intangible asset and the important information it processes and stores.
  • Another important reason for insuring by means of an electronic equipment policy is the ability to insure the reinstatement of data and increased cost of working, using a substitute electronic data processing (EDP) system. Not only is the hardware insurable but also all the software going with it.
  • The traditional conventional assets policy may provide accidental damage cover for the electronic equipment, however very few will provide cover for loss following electrical, electronic, or mechanical breakdown which can be arranged with applied electronic equipment insurance.

How knowledgeable are you about EEI and climate change?

Climate change will give rise to new perils of electronic equipment losses. Heat waves may result in the complete failure of a grid in some instances, leading to costly electric power plant shut-downs from spikes, surges, and power-cuts.

We cannot fully insure our way out of the climate change still to come. Businesses will need to adapt to cope with more frequent extreme weather and natural catastrophes. Brokers should not only be concerned about recommending the most suitable insurance product, but also be helping clients to adapt their businesses to climate change and make them become more resilient over the long run.

A mind-set of climate adaptation

Looking ahead, if adaptation measures are not taken, insurance may become unaffordable, or insurers may not have the capacity to cover for losses resulting from climate change. The consequences of climate change affect more than one line of insurance and are therefore not limited to losses of electronic equipment only. All stakeholders – business, government, insurers, and brokers – need to pool resources on climate change and work in partnership to ensure that its risks remain insurable.

Heart of the matter is that we are in this together.