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Management liability risks on the rise in tech sector as public trust declines: Marsh study

New York   |   March 30, 2021

Technology companies are facing increased management liability risks at the same time declining public trust within the sector is leading to more scrutiny and activism, according to findings from the 2021 Global Technology Industry Risk Study, published today by Marsh, the world’s leading insurance broker and risk advisor.

The annual study surveys communications, media, technology, and emerging industry risk professionals and executives globally. Of the 170 who responded to this year’s study, 37% said they expect their directors and officers liability (D&O) risk to be more of a concern in the next three to five years, with nearly 20% saying the COVID-19 pandemic exacerbated this risk. Yet as D&O risks rise, only 45% of the respondents view their D&O coverage as adequate — a substantial drop from the 84% who felt their coverage was adequate in 2020.

Rising management liability concerns come as the tech sector faces a crisis in confidence, the study notes. Trust in technology companies has fallen from increased concerns about privacy controls, business practices, size and influence, and social justice response. Only 3% of respondents said “trust” is not discussed within their organizations today, and 64% said they believe that establishing greater trust can help moderate their cost of risk or keep it below that of their peers.

“Technology has become ubiquitous, a trend exacerbated over the last 12 months, enabling and driving nearly every aspect of business and society today,” said Tom Quigley, Marsh’s US Technology Industry Practice Leader. “While this has resulted in strong revenue growth for the sector, it has also caused increased risk, scrutiny, and activism. Building public trust and improving corporate governance are among the key challenges that tech companies need to address and manage.”

Among other findings from this year’s study:

  • A majority of respondents ranked data security and privacy (72%) and digital interruption (54%) as the top two greatest business risks they face.
  • Only 20% of respondents reported that the pandemic has had a significant adverse effect on their revenue or represented an existential threat to their business.
  • US D&O pricing for tech companies increased nearly 40% in 2020, while property pricing increased nearly 30%.
  • Sixty-three percent of respondents are increasing retentions, and 54% are exploring integrated, structured, or alternative risk programs as a result of market conditions.

 

About Marsh

Marsh is the world’s leading insurance broker and risk advisor. With around 40,000 colleagues operating in more than 130 countries, Marsh serves commercial and individual clients with data-driven risk solutions and advisory services.  Marsh is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people. With annual revenue over $17 billion, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment through four market-leading businesses:. Marsh, Guy Carpenter, Mercer  and Oliver Wyman.  For more information, visit mmc.com, follow us on LinkedIn and Twitter or subscribe to BRINK