(IDG) -- If your car is damaged, you rely upon auto insurance to cover your losses. If your favorite piece of art is stolen from your house, you count on personal property insurance to cover your losses. And if your home is ravaged by fire, you rely upon homeowner's insurance to cover your losses. But if your network goes down, and you lose thousands or millions of dollars, your options are not so favorable.

The question now is what can we do about it?

Some companies, such as Amazon.com, Yahoo, TheStreet.com, as well as my own company, Competitive Analysis, conduct 100% of their business across the Internet. If the 'Net is down, we lose money.

But many other companies, from retail outlets to manufacturers to service firms that have unknowingly become just as dependent on the Internet - and not just for such things as sales, although e-commerce is certainly growing. Think about all the e-mail between companies and their partners that has replaced telephone calls and paper. These companies also rely on the Internet to connect their remote offices and personnel. In essence, they cannot do business without the Internet.

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And this dependence is growing. Many companies have abandoned their leased lines for less expensive and more flexible outsourced networks that increasingly rely on virtual private networks running across the public Internet. Doing so, however, means giving up control: No longer are these companies in charge of their own network destiny. No longer are they the ones to monitor and maintain their network.

To counter this loss of control, many firms have driven their network service providers (i.e., Sprint, GTE, MCI Worldcom, etc.) to provide service level agreements (SLAs) which specify - or even guarantee - a certain level of network performance (uptime, network delay, access, etc.). This is particularly critical for those shops that have also given up their own backup systems in favor of ones run by the service provider.

Typically part of an SLA is reduced monthly charges - or even rebates - if their networks do not perform as advertised. But that's sort of like the rebate you get when your power or cable goes out - it won't cover the cost of all the meat in your deepfreeze that spoiled.

Further, these type of agreements rarely cover network outages due to third-party activities, such as a backhoe cutting a cable in two, or a network outage caused by a slowdown in the "public" portion of the Internet.

So we still have a very fundamental issue to address: how does a firm recoup lost revenue due to network downtime? The answer might just be Internet insurance.

In order for an end user to recover lost revenue, several things need to occur. First, there has to a quantification of the lost revenue (airlines are well versed in this - their networks go down and they can lose up to $1 million a minute). Second, somebody has to pay. For large firms, self-insurance might be the answer. But for most of the businesses out there today operating on the Internet, it will be somebody else that has to pony up the lost. Should it be the service providers who put up the cash in the event of a failure in their network? Absolutely. But these firms are about as likely to do that as Ross Perot is to win the next presidential election. No, they do not have the resources or interest to do that.

So what about private insurance? It could work something like this:

First, the end user has to come up with a verifiable accounting model that demonstrates the impact of network outages (or even network slowdowns).

Second, we need a standardized metric for measuring the performance of the network (something that we should have anyway - standardized SLAs).

Third, we need a verification of the service provider's network. It has to be demonstrated that the network is sufficiently robust, that the management and support teams are more than adequate, and that the network equipment being used in the network is 100% reliable.

Fourth, we need a performance verification system for the Internet itself - the public portion, not just the private portions owned by the service providers.

And finally, we need to have an insurance firm somewhere willing go into this new market.

While the first four items are difficult to achieve today (believe it or not, most networks can't provide this type of basic performance monitoring across the entire network), the fifth is the real killer. There are simply too many issues related to network performance today to make this an easy sell. For example, what types of outages could, or should, be covered? Does a firm get revenue compensation if their primary service provider's network fails? Do they get compensation if the core of the Internet fails? And what about extending this to the phone network? Can we ask for compensation if a telco central switch goes down, reducing the number of people who can get onto the 'Net and thus possibly driving down revenues at an online store?

Does this sound outrageous? In reality, it is much more common than would be expected. For example, the airlines can predict with tremendous accuracy how much revenue they will generate from any one given geographic region based on time of day, day of week, week of month and month of year. So is it not reasonable to assume that if X% of a certain geographic region can't access the Internet to buy tickets, that $N dollars have been lost?

Is this a workable idea? Most of the people that I've spoken to seem to think it is. More important, it is a very necessary idea. As we move more and more of our business-critical communications to the Internet, we must find a way to balance the performance gains of the Internet with the potential losses due to failure of the Internet - especially as the stakes get higher and higher.

The question now is will the insurance companies actually have the desire to stand and deliver on this type of innovative service?

Fred McClimans is CEO of Current Analysis, Inc., a competitive intelligence and analysis firm. You can link to the Current Analysis Web site or reach Fred at fred@ currentanalysis.com.