What insurance do insurtechs need?

The concept of insurance dates back to around 1750 BC and what we know as insurance today, still dates back over 300 years to a coffee shop in London. Even down to the coffee, it’s still conducted in pretty much the same way as it was in the 1600s… So we’re long overdue a revamp.

That’s where insurtechs come in. As an insurtech (the first UK-based insurtech to become a Lloyd’s of London broker), we know exactly how difficult it can be to get the right cover when you’re starting out or scaling. We also understand the importance of working with a broker who gets you and your business.

Real-world challenges

You may be thinking as an insurtech, you know the pitfalls when getting the right cover. However, we regularly speak to insurtechs who are under-covered. Most are either covered for their insurance activities or their tech activities. Not both.

Insurance providers aren’t immune to making insurance claims just because we know about insurance. Take, for instance, CNA Hardy — a US-based commercial insurance provider established in 1897.

In 2021, it was hit by a sophisticated ransomware attack on its email systems and operations. The firm ended up paying over $40m in ransom to the hackers — a sum that could destroy a firm without adequate cover.

So, what insurance does an insurtech need and what will it cover them for?

What cover should you consider?

Professional indemnity insurance (PI)

If a third party accuses you of professional negligence, having professional indemnity insurance — also known as technology errors and omissions insurance — may help to cover any associated legal costs.

This cover can be particularly important for companies like insurtechs that offer advisory services, software solutions or handle sensitive data.

Cyber insurance

Cyber cover is designed to cover any business which operates online or is exposed to the internet. As an insurtech, you’re certain to fall into this category. You likely use digital platforms to streamline your processes, from automated underwriting and policy management to claims handling.

You also store sensitive customer information such as credit card data, addresses and other identifying information, such as health data. Should any of this be hacked, held to ransom or leaked, you could be facing a PR crisis and a large amount of downtime to fix the issue. Cyber insurance can support you to get back up and running quickly.

Directors’ and officers’ insurance (D&O)

Directors' and officers' insurance, also known as management liability insurance and D&O insurance for short, exists to protect entrepreneurs from the risks associated with running a business.

It’s available to firms of any size, whether a small startup or a large organisation. It can reimburse defence costs incurred by board members, managers or employees in defending claims made against them by third parties for alleged wrongdoing.

Intellectual property insurance (IP)

Intellectual property is anything you create with your mind — it’s an umbrella term for intangible assets. It covers everything from ideas and inventions, designs and artwork, symbols and logos, stories and brand names. While intellectual property isn’t something you can necessarily hold, it is a highly valuable asset as it represents a company’s competitive advantage.

Intellectual property is a hugely valuable commodity, often worth much more than a company’s physical assets. Say, you’ve built proprietary data analytics tools or AI to perform better risk assessments, personalised pricing or fraud detection tools. Innovation is an insurtech’s lifeblood, and that should be protected.

Some other key covers

You may be an insurtech that provides smart home sensors or wearable health trackers that offer real-time data used for risk assessment or more accurate and proactive loss prevention. If this is the case, you may want to consider product liability insurance.

Or maybe you’re an insurtech that uses blockchain technology and smart contracts for transparency, security and efficiency in policy management and claims settlement. If so, you may like to consider crime or specie insurance, to cover theft of, or damage to, the assets themselves.

Thinking holistically

Like many emerging businesses at the intersection of technology and industry, insurtech businesses aren’t likely to find all their exposures covered in a single policy.

For instance, a traditional insurance broker won’t necessarily cover liability arising from technology failure, sub-contractor liability or intellectual property infringement. On the other hand, tech errors and omissions insurers aren’t likely to cover exposures from the provision of insurance products or provide comprehensive regulatory investigations coverage.

One of the most important things the right broker can do for you is to provide a policy with insurtech-specific wording. This will incorporate your insurance activities and any exposure you might face from your software and data.

Top tips for getting the right cover

• Work with specialised brokers. Choose brokers with experience in the insurtech sector — likely another insurtech.
• Evaluate your risks. Conduct a thorough risk assessment to understand your specific needs — your broker can support you with this.
• Regular policy reviews. Continuously review and update your policies as your business grows and evolves — your cyber hygiene practices are hugely important.
• Consider comprehensive packages. Look for insurance products that offer combined coverage for your unique risks — again, a specialist broker can support you here.

Preparing for the future

As the insurtech industry continues to evolve, so too will the risks and challenges — believe us, we know! Staying ahead of these changes with the right cover is crucial.

By proactively managing your risks and working with knowledgeable brokers, you can protect the innovative solutions you’ve developed to reinvent this ancient industry and ensure your company’s long-term success.

Get in touch with one of our expert insurtech brokers today to learn more.