Out of all the different types of insurance for tech companies that are flooding the market right now, how do you determine which ones you need? Well, the answer actually depends on who you’re looking to protect. Insurance for tech companies can be broken down into two broad categories: insurance that’s meant to protect the tech platform as a business entity and insurance meant to protect the platform’s end-users/customers.
This second type, known as intrinsic embedded insurance, is the bundling of insurance coverage or protection into a product or service and making it available for purchase during the point of sale. Its purpose is to protect your users from the inherent risks of using your tech platform. For example, when someone is in the process of renting an RV from a peer-to-peer marketplace and they’re offered protection as part of the transaction, that’s embedded insurance.
Whereas many of the coverages that fall under the first type of business insurance are a necessary cost, the second type – protection for your users or customers – is not necessary. And although you can get by without ever giving embedded insurance another thought, consider this:
Embedded insurance can make your platform more trustworthy to your users, enhance their customer experience and at the same time benefit you in a number of ways:
- Increase your conversion rate
- Improve your customer LTV
- Provide an additional revenue stream
We’ll dive into these benefits and much more about intrinsic embedded insurance, but first here’s a brief rundown of the other types of insurance policies you may need to protect your company.
Insurance for Technology Companies is Business as Usual
A tech company is a business, and like any other business, you face certain risks you need to protect yourself from. The basic types of coverage include:
General Liability – This insurance covers third-party claims against property damage or bodily injury.
Commercial Property – At a minimum, you should cover your business’s personal property such as computers and office furniture/equipment. If you own the building you operate out of, then you’ll be required to have insurance for it as well.
Business Interruption – A relatively new type of protection, it will replace lost income as a result of not being able to do business due to a covered loss such as a fire.
Errors & Omissions (E&O) – This type of professional liability coverage protects you as a service provider from mistakes you could inadvertently make or omissions that are unfortunately bound to happen once in a while.
Workers Compensation – If you have employees, this protection is a good idea and many states require it.
Employment Practices Liability – Protect yourself from claims of discrimination, wrongful termination, harassment and a host of other employee-related risks.
Health Insurance – It’s nice to be able to offer this option to employees if you can afford it.
Employee Benefits Liability – If you decide to provide fully or partially paid health insurance to your employees, make sure you also have this coverage in case you forget to add a new employee to your health plan.
Recently, new insurance products have been specifically developed to protect businesses in the tech space, such as website designers, programmers, software developers, tech platforms and technology service providers. Insurance for tech startups might include:
Technology Insurance – Similar to E&O, this type covers events that could occur from a software or hardware failure.
Cyber Liability – Also referred to as data breach coverage, cyber liability often includes public relations coverage and ransomware coverage.
Cloud Service Interruption – Losses caused by cloud services going down are covered under this type of insurance.
As mundane as insurance is, it's critical to protect your business against risk with the right combination of coverages in the appropriate amounts. One uncovered claim could present a disastrous financial hardship. While it may hurt a bit to pay for it, keep in mind insurance is an investment that protects the future of your business.
Insurance for Tech Companies: The Type to Get Excited About
Once you get over the pain of premiums, think about how empowering (and comforting) it is to know you’re protected from so many risks. Similarly, but on a smaller scale, intrinsic embedded insurance gives your users the same peace of mind while they’re using your platform. They can purchase products or services with confidence knowing they’re protected.
Offering relevant and affordable protection products at the time of purchase delivers a great customer experience and a positive impact on the bottom line. For marketplaces, online shippers and asset-sharing sites, this is especially true.
The caveat here is that an embedded insurance program must be executed well. There are several ways to get a protection program up and running.
You can use a broker and work with a traditional insurance provider. Although this route can be fast, it has its share of disadvantages. Old-school insurers won’t have an understanding of your business and the unique needs of your customers - most often they won’t be able to take the time to get to know your real concerns either. As a result, you’ll find them to be less flexible when it comes to the insurance products you’ll be able to offer. In addition, you’ll be giving up the close relationship you have with your users, control of your program and a hefty portion of the profits.
You can develop an embedded protection program on your own. Yes, you will have ultimate control and own your program so there’s plenty of flexibility to create products with high appeal to your users. But there are many hurdles to get over when you try to build from scratch: insurance is a highly regulated industry. You’ll need the required licenses and most likely will need to hire an insurance expert to ensure you stay in compliance.
Then it can take years for your in-house engineers to build the front-end and back-end infrastructure - and it may always feel a bit like you duct-taped something together. And there’s the question of capital. Growing platforms often don’t have access to the capital required to cover a meaningful portion, or all, of the risk. When tech companies go it alone, their embedded insurance program can end up being a cost center rather than a profit center.
You can partner with an embedded insurance platform provider like Tint. Choosing this path gives you the combined advantages of both of the previous options with few, if any, of the drawbacks. Let’s take a closer look at the benefits of partnering with Tint.
The Benefits of Intrinsic Embedded Insurance with Tint as Your Partner
Enjoy True Ownership
We provide guidance and the necessary infrastructure, but you’ll control your program and when/how it is presented to your users. You’ll find it is particularly helpful to have our guidance when it comes to setting up your program structure, what you cover, what you don’t cover, how much risk you are willing to take on and how you handle claims – all the important details that matter to your users. Plus, depending on how much risk you decide to retain, all or some of the profits are yours. Because you have access to all your user data, you can better determine risk and develop intrinsic embedded insurance products at a lower cost.
If you decide to self-insure (aka retain part/all of the risk), not only will you keep the close relationship you have with your users, you’ll create a frictionless experience that provides a way for you to stand out from your competition who may be sending users to another website for protection products - while making a profit.
Save Time and Engineering Resources
Building the right program efficiently can be very difficult. It takes expertise in both software development and insurance solutions. Most likely your in-house engineers aren’t skilled in both areas. And even if they were, their time and attention needs to be on your core offering.
Tint has the infrastructure ready to go, ready for your customization. You can think of it as “insurance in a box.” Your engineers will be involved in the initial implementation which may take a few months. But after that, you manage the program without needing ongoing engineering resources.
Rely on Tint’s Expertise
Insurance is changing, but there’s much about it that remains the same. At Tint, we’ve enhanced our experience and knowledge of the insurance industry with an affinity for innovation. We’ll help you navigate through all the compliance and regulatory issues while helping you create exciting products for your unique users.
As insurance insiders, we can help with all aspects of your intrinsic embedded insurance program, from pricing and risk determination to coverages and claims management. Lean on our experts so you can focus on the business at hand.
Access to Capital
Asking yourself the question, “How much risk are we willing to take on”, is a great first step toward determining whether or not you’ll need access to outside capital. There are many ways to set your program up ranging from you taking on 100% of the risk yourself to taking on none of the risk yourself and using a more traditional insurer in the background.
Our team is experienced in setting up all types of programs and can help you make the best decision for your business. If you do decide to leverage an insurer to make that process much easier than doing it yourself. First, we’ll work with you to make sure your program has a solid structure. Then we’ll save you broker fees by getting you set up with a trusted insurer.
Protect Your Profits
A tricky aspect of making sure your embedded insurance program becomes an additional revenue stream is knowing which risks to insure. Without experience in insurance, you could build a program that isn’t going to be beneficial to your users, doesn’t cover the right items, or opens you up to high claim volumes in the future.
Tint’s deep industry expertise combined with our AI-powered software allows you to build a solid initial program and fine-tune your program over time. Managing your program to be a profit center rather than a cost center.
Tint: The Type of Insurance a Tech Company Needs
No doubt about it, insurance for tech companies is a necessary and complicated subject. Once you’re squared away with what types you need to protect your own company, think about how you might use embedded insurance as a way to enhance your users’ experience, increase conversion rates and bring in some additional revenue.
More and more tech companies are realizing the potential of embedded insurance and are adding innovative protection products to their platforms. Insurance for tech companies doesn’t always look the same, we’ve worked with some of the biggest names in vacation rental marketplaces, ridesharing and online shipping to create bespoke embedded programs. So, if you have questions about how to begin, why not turn to Tint to get the conversation started? Let’s Talk!
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