Electronic Equipment Insurance

To many owners, electronic equipment has become so vital that any major material damage can cause serious disruption to their business. Both the damage itself and also the costs of repair or replacement can place a burden on the company. Considering the high value concentration, the exposure as well as the consequences of material damage, it is easy to see that the owner generally has a major need for security. This cannot be fully satisfied even with the best precautionary safety measures. External factors, human error and natural hazards can never be totally excluded. The most economic way of covering the residual risk of sudden and unforeseen material damage is by means of insurance. As electronic equipment is exposed to a huge variety of perils the best cover is offered by the so-called all-risk policy. Basically an all-risk policy contains elements from many different policies, but in particular from fire and machinery breakdown policies.

Coverage highlights
It is difficult to give an exact definition of items, which can be covered under electronic equipment cover. A first selection criterion is the need for low-tension power supply. A second criterion is the amount of electronic equipment contained within the item. If most of the items value can be attributed to electronic equipment, then the item can be covered by electronic equipment insurance. However, house-hold equipment, as television sets, radios, etc. are not normally insurable as their value is much too low and the loss experience has been substantial. The most important area for electronic equipment cover is the computer sector. Cover can be arranged for a wide range of items, including mainframes, PCs, notebooks and palmtops. The smaller items may only be insured as a fleet, e.g. all of a companys computer workstations. Taking loss experience into account, mainframes and PCs represent better risks than smaller computers. This is mainly related to the fact that notebooks and palmtops are used in a constant changing environment. Damage or loss can arise from handling incidents (a computer falling off the users knees whilst seated in the train etc.), theft if covered, water damage. Usually cover applies to whole computer fleet, such as data processing center or entire corporate computer network. Another important area for electronic equipment insurance is the telecommunications sector. Here we will discuss only the two main fields in this sector, that is, television broadcasting and telephones. The two industries mentioned above are not the only ones where electronic equipment cover can be applied, but they are certainly the biggest. In all industries today there is an increasing demand for electronic equipment cover, as electronics in general have become an essential part of our life and will become even more important in the future.

Benefits of cover
Besides material damage cover for electronic equipment, the policy provides cover, if requested by the insured, also for data & data media and extra expenses (increased cost of working/ additional costs). In the case of data and data media the sum insured is made up of the material value of the data media, the cost of copying the data from one copy into the new data medium and in exceptional cases where the data copy can no longer be used as a result of an insured event for collecting original data and feeding it manually into the computer. As it is difficult to establish the costs of the expenses at the beginning of the insurance period, the sum insured is limited to a reasonable estimated limit of indemnity per insurance period. The insured can also request cover for additional costs under electronic equipment cover. This are costs which the insured has to pay for maintaining his operations, at least partially, for example by renting substitute equipment. The costs of these measures, for hire fees, transport, etc, can be covered under this additional cover. This does not, however, constitute reimbursement for business revenues in a

similar manner to business interruption insurance. The sum insured must be equivalent to the total additional costs reasonably estimated for a full year and supported by full documentation. Loss of profit as a result of computer damage can be insured under electronic equipment policy as an endorsement additional cover- but follows the principles and rules of a machinery business interruption policy. The following condition must be fulfilled: the loss must be quantified and backed up by full documentation. Electronic equipment is covered only at the location/locations mentioned in the policy, except portable equipment for which coverage can be extended also outside location.

Risk profiles
One of the main characteristics of electronic equipment is a very high value concentration, which will further increase in the future. The term electronic equipment covers products containing electronics and other precision engineering components. Both are very sensitive to any disturbance and even minor external factors can cause severe damage. If the high value concentration as well as the sensitivity of these products is taken into account, it is clear that external factors such as natural hazards fire and water could potentially cause major damage. A fire in the vicinity of electronic equipment might badly damage or even totally destroy the equipment, due not only to the effect of direct flames and heat, but also to soot and gas formation. Lightning can cause electronic equipment to fail. Such sudden high discharges of electricity can damage entire EDP center. Damage is also frequently caused by leaking water from broken pipes or blocked drains. Water can have indirect effects, for example plaster coming away from saturated walls or ceilings may damage computer hardware. Inadvisable location of electronic equipment in basements can lead to total loss in the event of flood. Small equipment such as notebooks, as well as all mobile electronic equipment, is particularly exposed to careless handling, operator error, environmental factors and technical damage. Last but not least the risk of theft, burglary, sabotage and criminal acts, e.g. by disgruntled employees is one worthy of mention.

Underwriting information required

Requirements differ in various jurisdictions as well as in respect of various underwriters. However, these are the usual, basic requirements: o Insured equipment must be ready for commercial operation o Location of the insured equipment equipment distributed in different locations to be mentioned all locations o Risk exposure of the building /location where electronic equipment is located (fire protection, anti - theft measures, earthquake increased exposure,etc) o Special conditions of functioning o A list of all insurable electronic equipment containing: - producers name; - brand; - type (fixed, portable); - sum insured new replacement value including costs of transport, installation and all other ancillary costs such as customs duty, consultans fee.