IoT and Connected Device Insurance

What makes this risk different?

Underwriters need to understand the product or service, who relies on it and what could happen if it fails. For this activity, describe device purpose, end users, connectivity dependence, firmware update method, vulnerability handling, component sourcing, cloud suppliers and overseas sales. Separate your own design and delivery responsibilities from those of component suppliers, installers, customers and subcontractors. Give the insurer a realistic account of maximum potential loss and any past claims or incidents.

Insurance questions to review

• Public and products liability: alleged third-party injury or property damage from operations, products and completed work, subject to exclusions and declared activities.
• Technology professional indemnity: defined professional services, software and advice exposures, often on a claims-made basis with notification and retroactive-date conditions.
• Cyber: incident response, privacy and covered network events, which may differ from a product defect or implementation error.
• Other cover: recall expense, property, stock, transit, management liability or crime where the actual operation warrants it.

Check limits, excesses, aggregate limits, exclusions, territorial and jurisdiction clauses and any contractually required insured parties. No item listed here is automatically included.

Illustrative exposure

Hypothetical example: A sensor transmits incorrect readings and a customer’s equipment is damaged. Product and service roles should be identified. This example describes an exposure only; a claim outcome depends on the facts and policy.

Connected device lifecycle

Provide device types, intended users, sensors and actuators, connectivity methods, cloud dependencies and countries of sale. Explain who makes the hardware, who writes firmware, how vulnerabilities are reported and patched, and how long devices receive security support. A change pushed after sale can affect both product and service exposures.

Discuss injury or property damage from a malfunction separately from privacy, data loss and network interruption. Product liability, technology PI, cyber and recall may have different triggers and exclusions. Ask about completed operations, overseas jurisdictions, third-party components and the cost of replacing the insured’s own defective units.

What to send for a quote

Provide a concise business and product description, turnover split by activity and country, principal contracts, customer industries, manufacturing and supplier arrangements, testing and quality processes, existing schedules and claims history. Where relevant, include technical documentation through a suitable secure follow-up channel.

IoT and connected device insurance FAQs

How do hardware, firmware and cloud services affect cover?

A connected device can combine a physical product, embedded software and a hosted platform. Review products liability, technology PI and cyber together so the declared activities reflect all three. A sensor error, a data breach and physical damage can engage different policy provisions.

Is product withdrawal included in products liability?

Do not assume so. Withdrawal, replacement and recall expenses are separate considerations. Review technology product recall insurance and any relevant exclusions or sublimits.

Does outsourced manufacturing remove liability?

No. Importers, designers and distributors may still face exposure.

See also embedded systems, our technology insurance guide and existing quote areas.