H& R Block

When Technology Fails Us – Product Errors and Omissions for Technology

During the 2013 tax season, H&R Block had to make a public apology to students whose refunds were delayed. A glitch in e-filing software meant that some 600,000 people who had filed a Form 8863 for a higher education tax credit saw a delay in getting their refunds. Though H&R Block wasn’t the only company impacted by this product error and omission, they certainly paid the highest price. Social media channels lit up with negative chatter about H&R Block, and all the affected returns had to be reviewed. Since the glitch occurred between February 14th and 22nd that meant tax season got perceptibly busier for the company.

Imagine a little software glitch creating a massive problem for your company. In addition to implementing your crisis management team and suffering the loss at hand, you also have to make good on the problem, and deal with the impact it will have on the current workload at your company.

Product errors and omissions in Tech

At some point, a technology glitch is likely to impact your company. It may be a software problem created in-house, or an issue caused by a third-party vendor. Even companies with exemplary quality control processes in place – like H&R Block – can suffer from this kind of problem. Think of how quickly Blackberry went from tech darling to tech nobody after a series of issues  or consider the loss Delta Airlines suffered when a tech glitch on the day after Christmas, 2013, mistakenly advertised and processed fares as low as $47 for a New York to L.A. flight. Delta had to honor the fares and suffer the loss.


Insuring against electronic disaster

How do you buy an insurance policy for “unknown, indeterminate electronic glitch that could bring our company down in a matter of seconds?” OK, that may be a bit over-the-top, but businesses face a wide range of unforeseeable problems that are difficult to insure.

One way to purchase a bit of security is to create a captive. With a captive, companies that rely heavily on technology can write an insurance policy to protect their company from potential disaster. A captive gives a bit more legroom than traditional insurance policies are able to so that companies can develop a policy that works specifically for their industry and their business.

If you’re worried about a potential glitch, make sure you’re covered. Talk with your insurance broker to see if they have a policy for you, and if you want to explore how a captive might be able to help you, please contact us.