Intellectual property is the new cyber – and brokers are ignoring a lucrative open goal, according to a specialist MGA.
Sam Bobo is MD and head of underwriting at Opus, a specialist MGA set up in 2014 to provide insurance solutions for intellectual property. He believes that while insurers have recognised the market opportunity IP cover offers, brokers have been far too slow on the uptake and are missing out on valuable business. With a recent study claiming 84% of Fortune 500 firms’ total asset value is now made up of intangible assets, he may well be right.
Bobo, who has been involved in intellectual property insurance for 27 years, told
Insurance Business: “Brokers are not seizing the opportunity at all. They are competing on all other insurances – cyber liability has come on huge bounds and IP could be exactly like that. The fact that a client sells or manufactures or even distributes a product could render them liable to IP infringement. Most brokers don’t even realise that.
“Brokers deal with physical assets, but you’ve got intangible assets which are not represented from an insurance perspective and that is what brokers need to understand. That transposes to small businesses - a lot of small companies now are software-driven and their entire asset base is probably the software that they’ve created to run their business, but that software is probably not protected and we’re saying to brokers you need to start thinking about this. We can structure solutions to that – the client doesn’t necessarily have to be involved in IP litigation for them to think about buying insurance, they should be buying it as a matter of course.”
When Bobo first became involved in intellectual property cover almost three decades ago, it was a very minor part of any business’s insurance mix. “It was an offshoot of a typical legal expenses policy, but because of the claims in the late 1990s it was taken out and it became a standalone policy,” he said.
“When I first got involved, the kind of underwriting we used to deploy was us asking a client on a proposal form ‘do you have intellectual property?’ That was enough for us using a simple rating matrix to say “your turnover is ‘X’, that’s your cover” without going into the detail of what their IP was. It’s become a lot more sophisticated now and we actually have analysts ourselves who delve into the IP the client has. If they’ve just got one trademark, the cost could be as little as £1,500 for maybe £1million, but I’ve got clients who are buying £25million of indemnity in any given year.”
With insurers grasping the issue and plenty of capacity in the market, now is the time for brokers to introduce IP cover to their client conversations, according to Bobo. He said: “The insurance fraternity has come on leaps and bounds to try to address this problem. Insurers mostly have done so, if you look into Lloyd’s, they probably have an underwriter who’s looking after IP, but that hasn’t transferred to insurance brokers. A lot of brokers still shy away from getting involved in IP because they think it’s a complicated subject matter, but in fact it’s not and that’s what we’re trying to say to brokers. If you just understand the basics of this, you can sit down with your client and structure something which will help them. We tend to find that once a broker understands the subject matter we tend to get a lot more inquiries through that broker because they’re now comfortable talking about it with their clients.”
