Intellectual property (IP) risks were identified as a top-10 concern for organisations in a recent survey by Aon, which also found that insurance covers only 16% of the $1.0 billion average potential loss for certain intangible assets.
The study surveyed more than 2,300 organisations representing different industries and geographies across the globe, targeting individuals involved in their company’s intellectual property, cyber risk and enterprise risk management activities.
It focused on the comparison of insurance coverage for traditional tangible assets to the coverage of intangible assets, including cyber liability, as well as intellectual property such as patents, trade secrets, copyrights, proprietary information and know-how.
“One of our key findings is that threats to a company’s intangible assets are not in proper balance with that company’s insurance protection,” said Lewis Lee, Global Head and CEO of Aon’s IP Solutions.
“Understanding how to properly value, exploit and insure intangible assets is exponentially heightened in the digital era,” he added. “Intangible assets are a Board of Director level issue.”
Aon observed a 33% increase in the protection of potential loss of information assets when compared with a previous study in 2015, versus only 9% for traditional tangible assets such as property, plant and equipment (PP&E).
“This indicates that organizations have begun to recognize the value of intangible assets as well as the significant risks surrounding loss of those assets — and that they are working to increase the protection of intangible assets,” the report stated.
28% of respondents reported that their company experienced a material IP event in the past two years, but few said they had coverage such as a trade secret theft insurance policy and/or a patent infringement liability policy in place currently.
Most incidents involved infringements of, or challenges to, the company’s IP (69%) or the company’s alleged infringement of third-party IP (31%), and most of these incidents involved trade secrets (42%), copyrights (26%) and patents (24%).
Of the 37% of respondents who said their policy covers a challenge to their company’s IP assets, 34% reported that the policy covers third-party infringement of their company’s IP assets and 33% said it covers an allegation that their company is infringing third-party IP rights. More than one-third of respondents say the policy does not cover IP events.
“While few companies have trade secret theft insurance policies or patent liability policies, organizations, by better understanding intangible versus tangible asset coverage, are better equipped to make informed decisions regarding strategy, valuation and risk transfer with respect to IP and other intangible assets,” Lee continued.
“Aon’s Intellectual Property Solutions group has developed quantifiable analytics and modeling that may increase the market cap of organizations while informing suggested limits and scope of intellectual property insurance coverage,” he noted.