2020 Predictions: IP insurance, the new cyber?

A few decades ago, the value of most companies comprised hard physical assets. Turn the clock forward to today and most hold their value in intangible assets.

To put some context around this, back in the 1980s the US Patent and Trademark Office received less than 100,000 utility patent applications a year. Today it receives more than 500,000 annually and while big names like Samsung and Apple are awarded patents in the thousands, small businesses are also landing new patents at record levels.

As the pace of innovation accelerates and the number of patents grows, so the potential for litigation increases – and small businesses are disproportionately impacted by intellectual property risk as they’re easier targets for patent trolls or large competitors looking to stifle competition. They’re not likely to have the in-house resources, legal or financial, to combat these threats or easily recover from them. They probably don’t even think that IP is a real exposure because all the disputes featured in the press centre on the huge global brands.

Sound familiar? We’ve seen similar challenges in another emerging class of insurance – cyber. Cyber insurance and IP insurance were introduced to market around the same time, roughly 20 years ago, at a time when the world was entering the technology revolution and intangible assets were becoming paramount. There are remarkable parallels between their development and I see signs that the advance of the IP insurance market will take a similar trajectory to that of cyber.

Just like cyber, there is a lot of education to do around IP insurance. The insurance industry needs to be able to clearly articulate exposures and risk. For example, a company may think that it can’t infringe on someone else’s IP because they have a patent themselves – but that’s not necessarily how it works in the today’s intangible economy. Most businesses of most sizes in most industries will have an IP risk whether they realise this or not.

Also, like cyber, organisations may think that they can turn to traditional general liability policies to address IP disputes – but if a policy hasn’t been specifically designed to cover patent infringement defence or pursuit, it’s likely that the company will be caught footing the bill when a dispute arises.

IP is an area of risk that is currently under-insured but with a growing need for businesses to protect their intangible assets, I think that we’re going to see this class emerge as must-have standalone cover over the next few years.

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