Nasscom In Talks With Gic, Us Insurance Firms For Insurance Cover

The National Association of Software and Service Companies (Nasscom) has initiated talks with the General Insurance Corporation (GIC) and US insurance firms for insurance cover to Indian software companies against litigation risks from US firms in case of failure to provide a solution to the `Year 2000 software problem.

The Year 2000 software problem or the `Millennium Bug as it has been dubbed, is the single greatest challenge facing the software industry worldwide.

Software applications have so far been built with two-digit fields for year dates to save on memory space. For example, computers recognise 1997 as `97. Thus, computers worldwide will not be able to operate on January 1, 2000, when the year date will read 00 leading to likely collapse of various banking, insurance and other applications.

 

Nearly 70 Indian software companies are working on the problem and they have to be made aware of the possibilities of litigation for perceived non-fulfillment of quality or contractual obligations, Nasscom executive director Dewang Mehta told Business Standard.

Industry experts have said that the Year 2000 litigation costs, lasting up to the year 2005, could cross $100 billion.

In such cases insurance becomes an important factor, as the cost of insurance is negligible compared with the possible damage suits, Mehta said, adding that it would be particularly difficult for small and medium software firms to meet huge litigation costs. Expecting such a problem, Nasscom has already approached insurance companies in the United States and also the General Insurance Company of India.

However, it is more important to seek insurance cover from United States law firms since the GIC may find it difficult to provide insurance cover in US dollars.

The objective is to ensure the possibility of providing insurance not only to Indian software companies, but also to their customers.Also, as a group we will be able to avail bulk discount from US firms on insurance premium, Mehta said.

Nasscom has also requested the department of electronics to bring in GIC and the other insurance companies.

Several Indian software companies have spun off new divisions to cater to this business and are providing software tools, consultancy, feasibility study and code testing for the Year 2000 problem..