Fintech is a fast moving, creative and transformational industry. Founders of start-ups enter the market with the goal of solving problems and simplifying financial transactions, in turn helping millions of businesses and consumers across the world. However, for new start-up companies, shifting from the technological landscape to navigating the world of insurance can often seem like a daunting experience.
To simplify this, Lockton’s Fintech team have highlighted the core covers that you should be considering when you first begin operating.
Professional Indemnity
Professional indemnity insurance provides protection for businesses that are offering a services or advice to their clients.
These policies typically provide cover for claims from:
- Your customers suffering a financial loss as a result of your services
- Certain regulatory investigations and fines
- Bespoke fintech policies will also provide cover for the impact of the failure of your technology. This cover is referred to as technology errors and omissions.
Are you an AISP or a PISP?
Account Information Service Providers and Payment Initiation Service Providers (AISP’s & PISP’s) are required to have minimum levels of Professional Indemnity Insurance to meet the requirements that are stipulated under the Payments Services Directives 2 (PSD2).
In order to gain authorisation from the FCA, you will need to evidence that you have an insurance policy in place that meets these requirements.
The Lockton Fintech team can help to arrange specialist insurance to meet these requirements, as well as help with ensuring you take out the correct minimum level of cover with the help of our calculator.
Directors’ and Officers’ Liability
Directors’ and Officers’ Liability insurance provides protection for the individuals that sit on the board of a company from claims brought against them in their capacity as a director. Even as a director of a limited company, you can be held personally liable for your actions which can result in legal implications.
Claims can be brought by a variety of third parties such as investors, shareholders and customers.
The policy will also provide reimbursement to the insured company in the event they pay a claim on behalf of a director.
Are you seeking investment?
Some investors will stipulate that you have Directors’ and Officers’ insurance in place to ensure that they have protection in the event that they take board positions. Having this cover in place can make you more appealing to some investors as it demonstrates that you have a considered your risk management procedures.
Cyber Insurance
Cyber-attacks are becoming a common theme across the financial services industry, and as tech-initiated firm you can become a target for hackers to get access to information
Cyber policies often have three main focuses of cover:
- First Party – Provides cover for response to damages to your own systems or networks
- Third Party – Provides cover for damages sustained by third parties following a cyber-attack, such as defence from legal action
- Breach support services – Provides access to specialist advisors 24/7 to support with breach advice including software/hardware support, access to PR and Legal advice, as well marketing and messaging
Employers’ Liability and Public Liability Insurance
Employers’ Liability insurance is a legal requirement in the UK as soon as you become an employer as it provides protection against claims from employees for injury or illness sustained from the workplace. The minimum level of cover you must hold is £5,000,000 from an authorised insurer.
The definition of employee under legislation is very broad so we will be able to provide guidance on whether you will need cover in place.
Public Liability insurance provides protection for claims made by the general public for property damage or injury. A good example of this is when people come to visit you at your officers or visa- versa.
Key Persons Insurance
Key persons insurance is a form of business protection, aimed at protecting a company from financial distress caused by the death of a key employee.
As a start-up, there can often be complications if one of the founders was needed to be replaced in the wake of a death or terminal illness. Key persons insurance offers companies a way of providing stakeholders, such as investors, with confidence that the company will be able to continue to operate.
Our insurance solutions for fintech companies are offered in one streamline solution that can be adapted as you grow. To find out how we can help create a unique insurance plan for your start-up please visit our Fintech Insurance page or get in touch with one of our experts.
