Broker Bulletin 11
It’s been an interesting week for reports on Intellectual Property. We’ve had three. And in respect of all of them there are some basic messages for brokers.
But, let’s keep it simple and focus on our own market report from Lloyds and try to determine the thrust of its thought-leadership.
Lloyds KPMG
Safeguarding Intellectual Property to Enhance Corporate Value 30/9/20. Whilst perhaps not the catchiest of titles the content is bang on trend. After a stroll through some numbers and graphs (after all – Accountant’s like numbers) there’s one that hits you like an express train. In 2015, 84% of the value in a modern business is in its intangible assets. And:
“ Over the last three decades, intellectual capital has become the dominant asset class in terms of the value drivers for companies ”.
Moreover:
“ Where IP has historically been seen as a legal device, it is now seen as an invaluable strategic tool that can help businesses gain competitive advantage and provide a strong foothold in a market. Protection of IP assets is therefore becoming more important than ever before. ”
Yes – protection includes IP insurance. Here’s how, as usefully explained in the report.
How to think about the IP risk
- Internal IP risks
Put simply, these typically arise from insufficient intellectual property protection. Where a business is blind to its IP assets, fails to see the risk to the business of infringement and fails to protect the asset through patent or formal registration. Not a broker’s bailiwick. But the next absolutely is.
- External IP risks
This is where the business becomes embroiled in an IP legal dispute to protect its livelihood and is forced to sustain the attendant costs of defending or pursuing its position to stay in business or enable it to profit from its creativity. You can insure against that. We know because that’s the insurance we sell. The report says:
“ One way organisations can protect themselves is IP insurance. Insurance solutions can offer extra protection in the case of an unexpected turn of events [an external risk] related to internal intellectual property management. ”
And, this can be a defensive or offensive insurance product or both. IP insurance offers risk transfer. Given the escalating costs of IP litigation and increased complexity – fully covered in the report – the business with IP insurance and access to experts has a chance to fight their case. The uninsured, faced with crippling legal costs;
“ …has no option but to negotiate a settlement from a weakened position ”.
Cut to the chase
Opportunities for the insurance industry has its own section in the report. Sure, there’s a lot the insurance industry can and needs to do to simplify its products and wordings and model the risk it writes. But sitting there, at point 1 of this section of the report, is the call to arms for the broker:
“ IP is a highly valuable business asset and should be adequately captured in client and insurer / broker conversations. ”
So there’s the broker takeaway. IP needs to be front and centre of any cover dialogue with your clients.
A Hero emerges
Properly used IP insurance can be truly heroic cover. It can enable David (your client) to overpower Goliath. Or, in less flowery terms once IP is recognised as the valuable business asset it is:
“ …insurance can provide a true leverage in the case of infringement …by allowing a ‘capital poor’ business to sustain a legal defence… ”
Who doesn’t want to be a hero? Go ahead, have that IP conversation with your client.
Murray Fairclough
Development Underwriter
OPUS Underwriting Limited
+44 (0) 203 920 9985
underwriting@opusunderwriting.com
