Getting the right insurance policies in place to protect your FinTech business is absolutely essential, whether you’re well established or just starting out. When things are running smoothly, often getting protection for your business in the form of insurance isn’t a priority, however it could be what saves your business one day.
A small investment and spending some time working with an insurance broker to get the right cover can be transformative for your business, when either the expected or unexpected happens. With the FinTech industry evolving so quickly, from AI powered personal management to the digitalization of trade documents, you need to protect yourself and your business. So, if getting the right cover for your business hasn’t been a priority up until now, it’s time for that to change! Here are the core types of insurance you’ll need for your FinTech business, whether you’re a thriving SME or a global enterprise.
Professional Indemnity
Firstly we have professional indemnity insurance, also known as PI, which provides cover for your business if a claim is made against you from a client for negligent or inadequate services. This can cover anything from legal fees to compensation for loss of revenue, claims for data loss, defamation or overall poor advice for their business. You may trust your team through and through, however everyone makes mistakes, and a claim from a large client in this area could be enough to take your business down for good.
With FinTech companies, you’re likely dealing with high amounts of sensitive data, from personal to financial, and there is so much that can happen outside of your control if this were to be leaked and cause serious reputational and financial damage to your clients. PI insurance is key for every business, however it’s absolutely essential for FinTech companies. Whilst you’re not legally obliged to have it, some clients will only work with companies who have a PI policy in place, or some regulatory boards will require you to have it in order to be registered with them.
Key Person Insurance
Next up we’ve got key person insurance, a type of insurance that protects your business against the sudden loss of someone who is integral to how the business runs. You can outline these individuals within the policy and in the case that they die or become critically ill, it will help to take away some of the financial burden whilst you grieve their loss and look at the long term impact it’s going to have on your business.
Losing someone essential to the business can have so many knock on effects, from an immediate loss of revenue through to a loss of customer relationships, the costs of hiring someone at their level and also to give you time as a business to find your feet. Often losing someone key to the business will often be someone you have worked with as a business owner for a long time, and so key man insurance also helps to take one thing off your mind whilst you navigate through this difficult time.
Cyber Insurance
One of, if not the, most important type of insurance for a FinTech business is cyber insurance. The FinTech industry is constantly evolving and technology is becoming more advanced, and unfortunately, a byproduct of this is that cyber scams are also increasingly intelligent and dangerous. Whilst there is a lot you can do to minimise the risk of a cyber attack, from having bullet-proof cyber security software, a dedicated team who are monitoring risks, regular training with your team and also following the basics of regularly updating passwords etc, sometimes attacks will still break through.
Cyber attacks can result in a whole host of issues, from direct financial loss as a result of theft or scams through to operational loss if your business can’t function and delayed product or service delivery. Usually one of the largest risks that come with a cyber attack is the leaking of sensitive data through a malware attack (malware attacks were targeted at as much as 40% of companies in the financial sector in 2023), which can leave your business with legal liabilities to cover the damage this causes for clients. Like we said, with technology constantly evolving, it’s hard to predict what could happen next, and so being prepared for the worst with cyber insurance is essential.
Business Interruption
Lastly, you should also look into business interruption insurance. This protects your business if you’re unable to operate for whatever reason, and in the fintech industry, you have the risk of technology failing you unfortunately, whatever that might look like! From loss of income through to the costs you need to try and resolve the issue with your business, this can really help to bridge the gap when you face an issue.
Examples of what business interruption insurance can cover include things like supply chain issues, natural disasters and disputes, but more in line with the fintech industry, it would be electrical or technological failures, malicious events like cyber attacks or any other non-malicious event that disrupts how your business is able to run. This is a good area to work with a broker, as with business interruption insurance often there are a lot of loopholes in terms of the types of infrastructures, softwares or internet providers that will be covered.
Also, there may be questions over whether the business interruption was triggered by a human, and if so, there may be push back from the insurance company. With a broker, they’ll help to make sure you get as much cover as you need.
Final Thoughts
There are many different types of insurance a business should have depending on the specifics of how they function and the service they provide, however three of the most important types of insurance as a FinTech business are professional indemnity, key person insurance and cyber insurance. Use this as your opportunity to get your insurance sorted, as you never know what is around the corner. We’d recommend working with a FinTech insurance broker who will help you to get the right cover for your business specifically, as we all know that insurance providers seriously push back on any claim that they can, so a broker will help to ensure that your cover is as bulletproof as possible so when you need to fall back on your policies, they do what they’re meant to do! Plus, with a broker, you won’t pay a fee, as it’s the insurance company who pays the fee to a broker for their referral!
