Brokers and their prospects are getting the drift: Patent risk can be a very real and devastating threat for all types of companies, and patent litigation insurance is a critical failsafe. It is, in fact, as important as any other business insurance — and well worth adding to a P&C product portfolio.
But what should the savvy broker and client look for in a patent insurance product? What sets a top-tier product apart from its competition?
Simple: an actuarial approach to assessing risk based on hard data.
|More data = better risk assessment — and a more customized policy
As with any type of insurance, one size does not fit all. Health insurance premiums, for example, take into account a wide range of factors and details outside the typical sex, age, height and weight.
Similarly, a company's patent insurance premium shouldn't be based solely on its size, industry and number of customers. Each business' needs are different, after all, and customers should pay only for the risks they're likely to face — nothing more, nothing less.
In order to accurately quantify patent risk, insurers need to dig deeper. Many insurers seek additional information from a potential client, like:
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- Type of technology made, used or sold.
- History of patent litigation for the company and its peers.
- Company business dynamics, including plans for growth during the policy period.
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On top of all of this, the truly essential element is cost. A quality insurer will incorporate key historical data points from existing customers relating to the typical cost of patent licenses, litigation and settlements.
Few insurers have access to this kind of cost data, which is fundamental to calculating a company's projected losses. Insurers that look at all of these data elements can create a much more nuanced and detailed risk profile. Armed with this wealth of detailed information, insurers can better quantify and assess a company's risk and tailor a patent insurance policy to meet the level of protection that company wants and needs.
|The human element
While data may be the lifeblood of the insurance industry, it's equally important for an insurer to use specialized experts to interpret and analyze that data and put it into context. After all, you would expect health insurers to seek the expertise of doctors when pricing health care policies, or auto insurers to involve people who understand automobiles and driving when pricing auto policies.
The same is true for patent insurers. Any provider can use an automated system to spit out a policy price based on a handful of details. However, quality providers should have true in-house patent experts who can correctly interpret the collected data — the company's information, the technologies at issue, and the litigation landscape — and draw meaningful connections. Only then can they fully understand the nature of a company's complex patent risk and design a policy to match.
|Think ahead
A business' chances for success can be hurt by any number of issues that may arise. The threat of patent infringement litigation a real risk. Don't be blindsided by a lawsuit before looking at patent insurance. And don't settle for a provider that can't — or won't — gather the detailed data needed to customize and properly price a policy.
When it's time to buy a patent insurance policy or add it to your portfolio, make sure you work with a provider that has the right expertise, platform and data insights to give each business precisely the coverage it needs. Only then can you manage patent risk with confidence.
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