Web site insurance

[James]

I'm interested to know how many of the members have taken out insurance to cover them against anything happening to their web site.

e.g Your host closes their doors one day, and stops answering the phone.

[akashik]

I'm not even aware there is such a thing. It's an interesting option if it is though... Anything internet related is always fun when it comes to stuffy old institutions. People who have been to their local bank looking for an internet merchant account for example will know what I mean. My local bank almost ran screaming when I mentioned the 'I' word to them.

Actually a great idea would be for the hosting company to be the one offering the insurance - much the same as online stores I suppose. As part of signing up they'd be insurance against loss of service for X amount of dollars. As far as I know no-one does this at all yet. Might be worth looking into though... :)

Greg Moore

[James]

I'm sure I read an article somewhere that this was going to be the "next big thing" The only draw back I can see is that hosts might not be able to sell insurance because its a financially regulated product.

It sounds like a nice issue for Tommy and his writers to look into and produce an article on....... hint hint, Tommy:D

[Tommy]

Hosting is a service and I can't think of an example where you can by insurance with the service provider. Quick, somone think of one.

It's true that Insurance is a hot topic at the moment. I'm planning an indepth feature in the October Issue of Web Host Directory Magazine.

If the hosts are interested in insurance perhaps we could get together a list of providers and create a new Spotlight category?

[Jaiem]

Never heard of it either. If it's out there I bet it's expensive (very high risk) and probably not underwritten by a major company. Much like getting professional liability insurance for a web designer or a hosting company - expensive and hard to get.

If that really concerns you invest in a mirror site.

[Phoenix]

I saw something related to that in Computerworld about 6-8 months or so. It was targeted at the providers themselves (mostly the ASP market) and was allow them to meet their SLA's, which usually have steep financial risks.

It covered against various types of outages that were outside their control (i.e. power, floods, alien invasions), and this way they could offer 5 nines SLA's and would pay out for them if there was an outage.

From what I recall of the article, the prices were very steep for these policies, because insurance companies don't take financial risks when it comes to writing a policy.

That would be the big sticking point to there being web site insurance against a business' going out of business. In as volatile an industry as ours, about the only third-party insurance company that would underwrite such a policy would be Lloyds of London and the premiums would be huge. They'll insure anything, but not cheaply.

For a web host to sell a customer a policy that would pay out in the event that the web host goes out of business, that would be at best a conflict of interest. And at worst, fraud-how's the policy going to pay out if the company folds their tents and vanishes into the night.

What they can do is provide a SLA (which can be defined as an insurance policy) that pays out in case of outages that can damage any business that requires their site up for revenue generation.

Of course, we've gotten into the discussion of SLA's as well on the 5 nines thread- SLA's that pay an automatic 100% in case of x amount of downtime, are not something that is generally included in hosting service, like Conxion's Failsafe SLA, they are negotiated and there is a 'premium' price for those, because of the financial risk the host is taking.

<tongue in cheek>I suppose what a customer could do is take out a life insurance policy on the owner of the company if they are afraid of them being not on the up and up and take out a contract on him, and if the doors slam shut and the phones just keep ringing, they have the contract executed and then collect on the life insurance.</tongue in cheek>

[JTY]

Phoenix, that might work..... course, you need someone willing to the 'job'......

[Tommy]

A website is like any other asset in a business. You should be able to insure your online site just like you can insure a shop.

[akashik]

I think the problem is though, when you wake up in the morning to go to work, your shop hasn't suddenly disappeared leaving nothing but a gaping hole in the ground, or the road out the front hasn't been removed leaving no-one with the ability to get to your front door.

On paper it's a great idea, but unless the insurance firm themselves doesn't have a working relationship with the hosting company I think it would be very difficult, or in the Lloyd's example, very expensive.

Greg Moore

[James]

Originally posted by akashik
I think the problem is though, when you wake up in the morning to go to work, your shop hasn't suddenly disappeared leaving nothing but a gaping hole in the ground

I know what you mean but I don't think its as clear cut as that. Insurance actuaries don't calculate premiums that simplistically. If the did you might have a problem getting cover for your car, which in my case has previously completely disappeared, leaving nothing but a gaping hole ;)

Many businesses have various types of income protection. I don't see how the risk of your host going out of business would be calculated any higher than the risk of an office fire.

[Jaiem]

Actuaries can compute the probability of loss (actually it's the probability of survival they compute, not loss) based on studies and surveys of the area in which you live, the property is owned, rates of incident with similar people/properties in the area etc.

With a host they can pop up and disappear over night. Very hard to measure the risk of a host run by a 18 year-old from thier bed room. The may be the next Michael Dell or just passing time.

[Tommy]

OK so it may be difficult to calculate and assess but I would think that people would want this service. I certainly would take out insurance cover for a website if it was critical to my business.

[James]

OK, how about this for a suggestion then. Someone set up an accreditation service, and no I don't mean web host guild, I mean a government funded non profit organisation.

If membership criteria included items such as business solvency, it would at least offer a benchmark for insurers to base their assessments on.

[Tommy]

Originally posted by James Cross
OK, how about this for a suggestion then. Someone set up an accreditation service, and no I don't mean web host guild, I mean a government funded non profit organisation.


Start taxing websites to fund this. :)

[akashik]

and there in itself is probably a reason... this is still a young industry and as a result, benchmarking can't really be done as yet (as I see it). As things mature and track records over longer periods of time start to emerge secondary industries will start to appear.

For the here and know it also explains why one of the best forms of 'insurance' is word of mouth.

Greg Moore

[Phoenix]

Originally posted by James Cross
OK, how about this for a suggestion then. Someone set up an accreditation service, and no I don't mean web host guild, I mean a government funded non profit organisation.


Sounds like a licensing bureau, sort of how mechanics, hair dressers, contracting companies and other service organizations have to be licensed to operate.

[James]

Originally posted by Phoenix


Sounds like a licensing bureau, sort of how mechanics, hair dressers, contracting companies and other service organizations have to be licensed to operate.

Exactly! If it was funded from within the industry, I'm sure the customers would be willing to pay a premium for a "truly" accredited host.

[Phoenix]

Originally posted by James Cross
Exactly! If it was funded from within the industry, I'm sure the customers would be willing to pay a premium for a "truly" accredited host.

You are preaching to the choir, Brother James. Can I get an 'AMEN'?

And if we do it from within, we can stave off the state and local government intervention and having them step in and set up a licensing bureau, that is going to happen when consumers, resellers, etc., finally get fed up with lousy service, fraud, false advertising, etc., and start bomarding the AG's offices with complaints and filling the dockets of our nation's courtrooms with lawsuits.

I'm really surprised that VDI didn't get slapped with a class action lawsuit as a result of the Level3 OC3 upgrade debacle. That sort of outage was preventable and therefore inexcusable, but except for some flames, the prevailing attitude seemed to be one of 'be patient, it will get better'. Or people just took their business elsewehere.

Involving insurance carriers with 'site' insurance, would put them in the position of accrediting and regulating the hosting providers who they insure-and I'd much rather have government regulation, than to let the insurance companies determine the standards that we operate by. They would also likely be very picky about which hosts they'll write policies for, and they'd pick the lowest risk companies, and those are the ones that you don't need to worry about hosting with.

What does everyone think about accreditation coming from within the industry? And what would the standards be to be an accredited reseller? Server-based host? NOC?

[Jaiem]

Originally posted by Tommy


Start taxing websites to fund this. :)

Washington doesn't need your help!!!! ;)

[Jaiem]

Not sure how you can license resellers.

Plans run all over the spectrum from dedicated servers to sales agents. You'd probably put some good companies out of business if they have to comply with gov licensing regs. And you'd probably have very large hosts like Verio and Alabanza lobbying hard for regulations to hurt the smaller guys. Or at the very least big hosts like them would be less effected by regulation. Keep in mind most hosts are still very small companies. They give good service but are small on shoe-string budgets and don't have all the formalities of a formal business organization.

IOW, don't have a knee-jerk reaction and let a few bad hosts force Draconian regulations in the name of "protecting" the public. There are many well documented situations of the best regulatory intensions killing a field.

[James]

Originally posted by Phoenix

What does everyone think about accreditation coming from within the industry?

I think that if industry members dont act soon, someone else will start making decisions for them. The problem will be in how to remain impartial while at the same time operate our own businesses. The first two attempts at this have ended in failure:

http://www.whg.org/index.htm
http://www.verihost.com

As both organisations have just acredited our old friends at CI Host. How can you take them seriously?

[Phoenix]

I guess what is most important is your point of view and your reason for involving yourself in such an organization. And your confidence in the quality of your own company, that you don't fear fostering fair competition. Realizing that we are all just a small part of a large industry that has room for all of us helps.

If you are looking to give back to the industry that has given you your livelihood, to give a hand up to newcomers to the industry as others have given you a hand up, and are an activist who enjoys helping bring order to chaos, one should have no trouble being impartial as part of a trade association.

In order to serve on the governing body of any trade organization, you must also be a member of it. That is ancient tradition from the days of the medieval Guilds that were the originators of the trade association.

Decentralizing the authority helps, as well. Most trade associations are split into chapters at various state and local levels, and those help keep the power at the grass-roots level, instead of in some cigar-filled room where industry fat-cats wine and dine politicos.