13 July 2018 – Many home insurance providers are failing to provide clear positioning on whether digital assets such as music, videos and photographs are covered in their policies, according to new research by Compare the Market. As more and more household assets are held online, the research suggests that the insurance industry needs to adapt and change to mirror our increasingly digital dependencies.
Compare the Market analysed the policy wording of 26 home insurers around the cover they provide for digital assets. Most of the policies (20 of 26 – or 77%) specify that they offer some protection for loss or damage to digital assets, however the definition of digital contents is often vague and inconsistent between policies. Most policies refer only to “electronic data” or “downloaded content”, whilst only five specify specific digital assets such as music or videos. Only two policies mention cover for digital photographs.
When specifying the type of digital assets which are covered, policies again vary. Of those policies which offer protection, many state that they will pay to replace legally downloaded audio/visual files which have been lost or damaged but will not pay to rewrite or remake them. Others specify that in order to be protected by the policy, data must belong to the policy holder or their family, and one policy stipulates that to receive compensation for data the policy holder must still have the receipt.
Policies also vary significantly in the level of cover they offer, with pay-outs ranging from £500 to £10,000. The most common pay-out is £1,000, cited by five providers. However, of the 20 providers which do specify they offer protection, six do not specify the specific pay-out amount for digital assets in their terms and conditions and customers may have to check these limits with their individual providers.
|Level of payout
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Home insurers are, however, far clearer about exclusions to pay-outs for digital damage. Of those which offer protection for digital assets, 17 policies note that they do not provide cover for damage or loss to computers or data caused by a virus or malicious software. Only eight policies offer cover for damage or loss of contents stored on a mobile phone.
Six policies go even further and specify that they will not cover for any loss of data which results from a computer's failure to recognise, interpret or process correctly any date as its true calendar date or its ability to continue to function correctly beyond that date – for example, the so-called Millennium Bug in the year 2000 when many computer files were thought to corrupt.
However, households do not know how much insurance they would need to cover the value of their digital downloads if they were lost or damaged. In a recent survey of 2,000 people, over a third (37%) said they would have no idea how to calculate the value of their digital assets.