FinTech Insurance Buyers Guide

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An expert guide to buying FinTech insurance for your established financial technology company or startup

The below expert guide provides an insight for those FinTech’s wish to manage their exposure to 3rd party liabilities and expenses with insurance should something unexpected occur and cause a significant financial loss to the business.

As a Willis Towers Watson Network broker, we have the expertise and market access necessary to identify insurance solutions to meet your needs. Give one of our FinTech insurance experts a call on 0345 625 0711.


What you need to know about fintech insurance

There are challenges we discuss below to consider when seeking insurance cover for FinTech’s as well as identifying what insurance covers are typically sought and why they are purchased.

Given fintech’s will seek to solve financial problems with new technology, it’s important we articulate a clear understand of the business model to secure the most favourable insurance cover from the market.


What is FinTech insurance?

FinTech insurance is a selection of covers that offer financial protection against unexpected events, purchased by businesses that use technology to support or enable financial services.

Typically, the covers purchased will include professional indemnity, cyber insurance, directors and officers, crime insurance, and office insurance. Additional covers may include keyperson insurance and business travel insurance.

We work with several insurers which can consider offering insurance protection to fintech’s. We’ve put together the below expert guide to identify what covers are typically purchased, what protection they can offer and some of the challenges.


    FinTech regulatory burden

    In a rapidly changing environment, regulations are constantly evolving. A FinTech’s failure to comply with regulations can have serious consequences for both the company and the individuals involved with the business. 

    Directors’ and officers’ insurance is a key protection purchased by the company for the senior individuals making decisions, as individuals can be held personally liable from claims arising from a variety of sources, including shareholders, regulators, creditors, and employees. 

    Commonly requested by private equity and venture capital investors because they wish to protect their investment. However, without a trading history and the stability offered by a stable cash flow, this makes identifying the cover difficult. Evidence of a business plan, complete proposal form and cash flow forecast will be required to secure cover.


    FinTech business models

    FinTech insurance is best utilised to cover high severity and low frequency events. B2C FinTech models can make obtaining professional indemnity cover challenging unless the insurer has sufficient claims experience within the financial sector you operate. 

    Dealing directly with consumers, means you are potentially exposed to a higher volume of allegations to defend. Whereas B2B FinTech models are more acceptable to insurers, and protection can be sought for breach of contract and negligence in the offering of your Fintech services. 

    Professional indemnity insurance can offer very broad cover in the provision of services. However, the cost can be prohibitive for fintech’s’ (especially startups) if it isn’t a prerequisite to trade by the Financial Conduct Authority.


    What business insurance is most important to FinTech companies?

    The most important Fintech business insurance will depend upon the nature of your services you provide to your clients. We would recommend you take a holistic approach because it’s the combination of covers which provides the best protection.

    Below we've produced a guide about the different types of insurance most commonly purchased by FinTech companies:

     

    Professional Indemnity Insurance

    Professional indemnity (otherwise known as Tech E&O) can offer financial protection against claims made by your clients if your FinTech services or products fail causing them a financial loss.

     

    Directors & Officers Insurance 

    D&O Insurance provides financial protection to the senior individuals whilst acting in a managerial capacity. Shareholders may request the cover is purchased as a prerequisite to a funding round.

     

    Cyber and Data Insurance 

    Cyber insurance protection offer cover for both 1st party expenses you would incur, and 3rd party liabilities due to a breach of security or privacy. FinTech's may potentially hold a significant amount of personally identifiable information.

     

    Intellectual Property Insurance

    Intellectual Property insurance provides cover against the legal costs from pursuing infringement or theft of Intellectual property against others or the legal defence costs for your business if accused of IP infringement or theft.

     

    Commercial Crime Insurance

    Commercial crime insurance can provide protection from financial losses related to business-related crime, including theft by employees, forgery, robbery, and electronic crime. 

     

    Key Person Insurance

    Key Person insurance can be arranged to offer protection against major financial harm incurred due to a significant employee passing away or becoming ill. 


    We've assisted with a wide range of FinTech company's insurance programs including:

    • Trading Platforms

    • Payment Transfers

    • Blockchain and Crypto

    • Digital Banking

    • Insurtech

    • PSD2 for AISPs/PISPs

    • RegTech