
Cyber Liability Insurance Is Failing Technology Manufacturers—Especially When It Comes to IP Protection
Intellectual property (IP) often represents the majority of a technology manufacturer’s business value. For many companies, IP comprises 80% to 90% of their market valuation, embedded in proprietary algorithms, design processes, and confidential manufacturing techniques. However, the insurance coverage most companies rely on—standard cyber liability policies—typically fails to protect these assets.
If you’re assuming your IP is safe because you have cyber insurance, this article is a wake-up call.
In this in-depth guide, we’ll break down what standard cyber policies actually cover, where they fall short for IP protection, and what alternative solutions are emerging to close this growing protection gap.
The Cyber Threat Landscape Is Escalating for Tech Manufacturers
Technology manufacturers operate in one of the most targeted sectors for cybercrime, and the data proves it. According to Munich Re’s 2025 report, manufacturing has the highest proportion of ransomware claims across all industries. These attacks are increasingly aimed at disrupting automated production lines and stealing proprietary trade secrets.
Key threats to IP include:
- Ransomware Attacks
Disrupt operations and threaten IP exposure. - Intellectual Property Theft
Often goes undetected until a competitor hits the market with your stolen idea. - Supply Chain Attacks
Vendors with weaker cybersecurity are used as backdoors into your systems. - Business Email Compromise
Sophisticated phishing campaigns target sensitive files using phone, email, and messaging apps.
AI is accelerating the threat—criminals now use it to automate and scale attacks, while your AI tools and data themselves have become new, valuable targets.
What Standard Cyber Insurance Covers—and What It Doesn’t
Many companies assume cyber liability policies will cover all forms of digital risk. But these policies were not designed to protect long-term strategic value—they focus on operational recovery.
Typical policy inclusions:
- Forensic investigations
- Notification to regulators and affected parties
- Credit monitoring
- Ransom payments
- Short-term PR response
These are essential but reactive. They don’t begin to address what happens when your innovation is stolen.
Critical Policy Exclusions That Harm Manufacturers
Here’s where standard policies consistently fall short:
- Loss of Future Profits
You’re covered for lost income during downtime—not the competitive damage that follows IP theft. - IP Theft Devaluation
No protection if a trade secret’s value is destroyed by disclosure or unauthorized use. - System Improvements Post-Incident
You’ll get help restoring systems, but not upgrading them to defend against future threats. - Time Deductibles
If a breach disables production for fewer than 8–12 hours, it may fall under the coverage threshold.
Manufacturer-specific exclusions include:
- Nation-State Attacks
Often excluded as “acts of war,” even though they are the most damaging and targeted threats. - Insider Threats
Not always fully covered, despite being a top risk to proprietary processes. - Supply Chain Breaches
If a vendor is the point of entry, you may not be covered—even if your IP is stolen.
Intellectual Property: The Most Valuable and Least Protected Asset
S&P 500 data shows that 80%+ of company value is tied to intangible assets, particularly IP. Yet cyber policies overwhelmingly cover tangible losses.
For manufacturers, trade secrets carry even more weight:
- They’re not registered like patents.
- Their value relies on strict confidentiality.
- They’re often embedded in everyday processes, automation, and AI models.
If a competitor gains access to your proprietary workflows or data, your competitive edge can evaporate overnight—with zero insurance support to recoup that value.
Why Cyber Insurance Isn’t Built for IP Loss
Even among specialty lines of insurance, protection for intellectual property remains limited or nonexistent.
- Cyber Policies
Cover the cost to replace data—not the value of the content inside it. - Traditional IP Insurance
Covers infringement lawsuits or defense, not asset loss. - Crime Insurance
Focuses on money and securities, not intangible innovations.
Trade secrets, however, have a unique trigger event—unauthorized disclosure—that makes them theoretically insurable. The problem is that most businesses aren’t tracking or valuing these assets in ways underwriters can work with.
The Cost of Not Protecting IP
Failing to insure your IP has business-wide implications:
- Competitive Damage
Lost exclusivity often translates into years of lost market share. - R&D Investment Loss
Decades of innovation can vanish in a single attack. - Brand and Trust Erosion
Clients may leave if your reputation for innovation is compromised. - Regulatory Risk
Breaches may expose sensitive personal data or regulated algorithms, leading to penalties standard policies don’t cover.
The financial, operational, and reputational fallout from unprotected IP is long-term—and devastating.
How to Close the Protection Gap
Manufacturers can take strategic steps today to address this blind spot.
1. Assess IP Exposure Internally
- Identify trade secrets, proprietary code, confidential blueprints, and unique processes.
- Quantify potential losses if that information were leaked or stolen.
- Understand how those assets are accessed, stored, and shared internally and externally.
2. Explore Specialized Insurance Products
- Trade secret insurance now exists but requires formal asset documentation.
- Evaluate policies that go beyond forensic coverage and address actual IP value loss.
- Look for underwriters familiar with AI, automation, and advanced manufacturing.
3. Strengthen Risk Management Programs
- Implement vendor cybersecurity standards and enforce them.
- Classify and protect sensitive IP with stricter access controls.
- Train teams on data handling, insider threat prevention, and secure communication.
4. Prepare for IP Crisis Events
- Build incident response plans around IP theft—not just operational outages.
- Include legal protocols for preserving trade secret status.
- Outline reputation and customer relationship strategies post-incident.
Final Thoughts
Most cyber liability policies were created to address operational setbacks—not protect the unique innovations that drive your business forward. Yet the threats targeting IP are rapidly evolving, fueled by automation, AI, and geopolitics.
Technology manufacturers can no longer afford to assume their IP is insured. It often isn’t.
The good news? Emerging coverage solutions are starting to meet this need—but they require proactive steps from companies like yours. Cataloging assets, building risk frameworks, and working with specialized providers can transform your IP from a vulnerability into a protected advantage.
Your IP is your business. Start protecting it like it is.
