Our 3rd Annual Vertical Insurance Index: Startup Snapshot is here. This report, as in previous years, takes a deep dive into founders’ insurance buying patterns, fluctuations in the market for startup policies, and factors influencing coverage decisions.
The Startup Insurance Benchmarking Report is part of a series of reports from the embroker. They are designed to provide an insightful, comparative look at business insurance coverage and costs for startups.
Startup Snapshot analyzes the costs and benefits of business insurance at various stages of startup development. This, along with many other takeaways, will help them make smarter, more confident purchasing decisions when it comes to the security of their business.
But beyond cost, the benchmarking report also gives entrepreneurs insight into insurance trends that reach beyond their wallet. Our data snapshots are sourced from over 5,000 embroker individual policyholders, and look at real-world purchase data (not off-the-shelf pricing information).
In our Startup Insurance Benchmarking Report we provide insight into startup trends that don’t make the headlines.
This year, tightening markets and the economic downturn have taken their toll on investing in risk mitigation and transfers.
Highlights from Embroker’s 2023 Vertical Insurance Index
Here are the excerpts from our three key policies in the Embroker Startup Package:
Employment Practices Liability Insurance (EPLI)
As companies grow in size and revenue, so does their risk. EPLI had the highest year-on-year premium change from 2021 to 2022, with an average premium increase of 31%. This is in contrast to last year’s results, when the EPLI had the least change compared to 2020, at only 7%. This increase may be due to inflationary pressures and internal restructuring that prompted many tech companies to significantly reduce staff to free up capital, leaving them more susceptible to wrongful termination lawsuits and other claims. got to know.
Director & Officer (D&O)
The responsibilities of founders and leaders grow with their companies. As startups hire more officers, board members and directors, they must account for additional risk. While nearly all startups are spending the most on D&O, many with $25 million or more in funding choose to lower their D&O threshold in 2022. Only 14% of these businesses selected the $5M ceiling in 2022, compared to nearly a quarter (22%) in 2021. Given the rising prices of D&O overall, this may be due to budgetary limitations. Mid-size startups (those with revenue of 1M-$5M) saw the largest increase in D&O premiums, with a 50% year-over-year increase. This may indicate that the midmarket has taken a more significant hit in this funding scenario, resulting in a greater sense of vulnerability for their executives.
Technology errors and omissions (includes technology E&O, cyber)
As a startup brings on more customers and team members, the opportunities for project issues, product defects, breach of contract and cyber security vulnerabilities increase. E&O/Cyber premium grew 111% for startups raising over $25M in funding from $5M-$25M. However, E&O/cyber policy limits show signs of stabilizing compared to 2021 when policy limits increase across the board. Although external data shows that cyber threats are increasing daily, the founders prioritized D&O and EPLI over the potential fallout from cyber threats and attacks as it relates to frontiers. In 2022, 38% of companies with 30+ employees had a $5M limit policy, the highest available compared to 50% last year. Additionally, 25% of companies with 30+ employees had a $1M limit policy, the lowest available in 2021 compared to 19%. These findings suggest that founders of large startups in particular may have increased confidence in their technology and cyber security guardrails. It can also speak to businesses that are moving their remote workforce back to a physical office, which minimizes cyber security risk.
The startup risk environment is more unpredictable than ever. Using reports like these, founders can better understand the risk landscape they’re operating in, and what policies they need to move that risk.
Insurance cost analysis for startups
Embroker Vertical Insurance Index
How much are you paying for your insurance? Are you buying the right policy? Find out what founders are doing, and trends you might not have noticed.