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The global FinTech market is growing exponentially, representing opportunities and their unique risks associated with companies operating in this space. As FinTech's reach expands, and their capabilities evolve, they must have the best policies.

FinTech is much different than traditional financial institutions and does not share many of the risks associated with running a digital business.  More often than not, old manuscripts from carriers still in use have not kept pace and exclude many of the perils modern FinTech's face. 

Here are five reasons why you should look at FinTech insurance:

1.  Your policy does not insure you.

FinTech insurance policies exist to fill a gap surrounding technology companies that transact funds and provide dashboarding for consumers. Many domestic carriers do not offer FinTech platforms coverage—for example, first-party crime, cyber and intellectual property.

2.  Your carrier is not thinking about superior protection for your directors.

Insurance forms an integral part of your overall risk management strategy. FinTech insurance protects your business's value, where traditional insurance carriers do not provide security in the event of litigation. Critical for start-ups, mainly those trading in sensitive financial information such as online banking, where regulation is still evolving, and threats continue to emerge.

3.  No one is thinking about changes in regulators' requirements

FinTech companies have greater financial exposure due to regulatory changes. Errors or Omissions Insurance can be imposed by various jurisdictions to meet your capital requirements. Don't be caught missing this critical component. 

4.  Your policy does not offer complete protection for its directors and officers

We all know that members of senior management and boards can be held personally liable for claims brought against the company. Claims can be brought forward by customers or clients, shareholders, lenders, competitors, and contractors. Without FinTech protection, it can be a barrier when it comes to recruitment, as it enables companies to attract and retain the best directors available.

5.  A Specialized Fintech Policy makes risk easier to manage

FinTech insurance policies are comprehensive and have been designed with the work of FinTech companies in mind. Not only are these policies an effective risk management tool providing peace of mind for the company, they're also increasingly important when it comes to hiring and retaining the best talent and can prove vital in helping companies adhere to requirements from regulators.

Top 5 risks for FinTech businesses

1.   Professional liability

Negligent advice and failings in client services are common risks for any company providing financial services, especially FinTechs, who offer new financial products through new distribution models. FinTechs can also rely on third-party contractors, adding liability risk due to third-party negligence.

2.   Regulatory environment

New technology, new products, and further distribution bring a wealth of opportunities and unique regulatory exposures. FinTech companies will need to ensure they keep on top of implementing suitable and satisfactory risk management systems. As the FinTech market evolves, so will the regulatory environment, and a significant risk for FinTechs will be keeping pace with the regulators' latest updates. FinTechs will also have to consider differing regulations in multiple territories should they operate internationally.

3.   Theft of funds

The majority of FinTechs deal with a high frequency of funds movement.  High volumes of payments, transactions, and customer accounts and the fast growth and implementation of new technology leave them vulnerable to theft. These thefts could be by an employee or an external party.

4.   Cyber event

Given the nature of their operations, FinTech companies are prime targets for cybercriminals. Network security, data breaches, or even a denial-of-service attack - as well as damage and rectification costs following these incidents - should be a significant concern for FinTech companies.

5.   Technology failure

Innovative technology is essential for FinTech companies - it is how they have disrupted traditional financial services - but this heavy reliance on technology infrastructure means firms can be vulnerable. Technology failure can mean customers are unable to access services resulting in lost income or lost customers.

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Everything you need to know about insurance costs for Startups

Startups are particularly vulnerable and need robust protection from lawsuits because just one catastrophic event could be more than enough to put their business out of business.

Startups face serious odds — about 20% of businesses fail in their first year, and around 60% will go bust within their first three years. However, knowing that you need insurance and knowing what insurance you need are two different things. Especially since startups grow so quickly, finding and budgeting for insurance can be a complicated task.

One way to figure out what insurance might cost is to identify a startup similar to yours in size and type and find out how much their insurance costs. To help you better understand what type of insurance your startup will need and what it might cost, we’ve leveraged our data on startup insurance to create a calculator you can use to find insurance costs for similar startups. Read through our guide or jump to the calculator below.

What Type of Insurance Do I Need?

The first step is to determine what insurance your startup will need at different stages of growth. There are four main types of insurance that you will likely need:
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Errors & Omissions Insurance (E&O)

Companies that provide services based on professional expertise can be held liable if the information or services they provide include mistakes or experience technical errors that cause damage to the client. Technology Errors & Omissions Insurance protects against claims that arise from these mistakes. E&O Insurance can also include Cyber Insurance, which protects against claims caused by a security breach or mishandling of client data.

Directors & Officers Insurance (D&O)

Once it’s time to start assembling your startup’s Board of Directors, you should add a Directors & Officers Insurance policy to your package. As the name suggests, this policy protects directors and officers if your startup is sued and any board members or company leaders are named in the lawsuit. This type of protection is essential to your startup since it will cover settlement costs and legal expenses. You’ll also find that few people are willing to join your board unless you have a D&O policy in place.

Commercial General Liability & Property (CGL + Contents)

Once it’s time to lease an office, you will have 'trips and fall' exposure as well as fire, damage and theft exposure for everything you own inside the office. Starting with a lease, your landlord will more than likely require you to carry a minimum of $2,000,000 commercial general liability. This covers the landlord against your negligence causing bodily injury as well as damage to the space itself.  CGL and Property together are also referred to as a Business Owner's Policy or 'BOP'

Employment Practices Liability Insurance

Finally, Employment Practices Liability Insurance will be necessary once your startup starts hiring employees. This policy covers claims from within the startup pertaining to workplace issues like discrimination, wrongful termination, failure to promote, sexual harassment, etc.

Depending on your industry and company type, you may also want to consider additional policies like Workers Compensation Insurance, Commercial Crime Insurance, Fiduciary Liability Insurance, and more. However, E&O, D&O, Office Liability & Contents & EPL are the four basic insurance policies that all startups will need.
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How Much Will My Insurance Cost?

Budgeting for insurance is important but can be confusing if your company is going through a growth spurt. Your insurance costs will likely change frequently in your startup’s early stages, but you can predict when these changes will occur and how much each change will cost.

The cost of your insurance depends on:

• Which policies you need
• How many people are covered
• How much funding you have
• Your estimated annual revenue

Using cost calculations for the many different types and sizes of startups we’ve insured in the past, we’ve created a calculator that can help you estimate what your insurance might cost based on costs for similar startups. If you need a more specific estimate, you can get a quote based on your particular startup’s needs.

Get a quote for startups now

Tips for Updating Insurance as Your Startup Grows

Insurance policies are typically reassessed and adjusted each year when it’s time to renew. However, if your startup is growing quickly, you’ll need to be proactive about updating your insurance as your company expands.

The three most relevant benchmarks for estimating insurance costs are operations (what you do), annual revenue, and employees. It would be best if you looked to consult with your provider about adjusting your coverage whenever you hit a new milestone in one or more of these areas.

While your premiums will likely increase as you grow, keep in mind that policy renewals are also an opportunity to renegotiate your rates or shop around for a new provider. 

Get a quote for startups now

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InsureCert's distributed web application technology delivers online insurance products saving carriers, MGAs and brokers money on order processing. For insurance IT teams, it will mean quicker distribution of insurance certificates with private-key validation to ensure that policies are current and accurate. For brokers, it will mean increased revenue through cross-selling and better client retention. Finally, for consumers, it will mean peer-reviewed carriers, better risk management, sound advice, and an excellent way to stay up to date with policies and manage claims through your mobile device.

InsureCert is an Insurance Software-as-a-Service sales platform that converts low-margin program business into scalable profit centers. The company was founded by Craig Arnatt, who identified a need for brokerages to transform how they handle program business. Today, his growing team of coders works with insurance carriers, MGAs and brokers worldwide, building modern digital InsureTech solutions. 

Many insurance companies are writing small premium business that garners minimal margin and places a drag on their back office. The cost of continually staffing, rating, invoicing and generating proof of insurance certificates is a significant pain point for all stakeholders. With 1 in 25 E&O claims involving inaccurate certs and 21% of insurance fraud involving misrepresenting coverage, a real-world problem requires a solution. Until now, there hasn't been an easy way to handle online sales, policy expiry reminders and universal validation.  

InsureCert's Mobile First Platform provides next-generation insurance solutions for business owners on the go.  

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