Technology entrepreneurs are everywhere these days—not just in Silicon Valley. Tech accelerators and incubators are funding novel startups from Maine to California. Each of these young companies needs comprehensive insurance that independent agents are best positioned to provide. Are you ready to serve them?
The problem for many agents is that tech startups are not traditional Main Street businesses. The products they sell or lease, often via the cloud, are likely to be global. Tech companies also confront unique risks like electronic vandalism from cyberattacks, lost business income due to an internet outage and supply chain disruptions with far-flung suppliers.
Since each startup has unique needs related to selling a potentially next-generation technology, agents may feel they are ill-equipped to understand a tech startup’s products and effectively address the related risks. Considering the errors & omissions repercussions, no agent wants to jeopardize a client by failing to provide necessary coverage. Although independent agents serve diverse commercial clients in a myriad of industry sectors, serving a tech startup may seem daunting.
“Not only can agents well serve this fast-growing industry sector, the entrepreneurs running these businesses need their help,” says Gregg Fergot, vice president in the underwriting technology practice at CNA Insurance. “Founders and CEOs of tech startups are so fully engaged in building the company they have scant time to understand the organization’s risk profile and insurance needs.”
Without the expertise provided by a trusted independent agent, these startups are susceptible to significant gaps in insurance protection. “Many small tech companies purchase a simple business owner’s policy that lacks critical coverages for electronic vandalism risks and technology service provider outages, among other exposures,” Fergot says. “Other risks may be insured with inferior limited financial protection, such as physical damage to computers, servers and electronic data processing equipment.”
These risks typically are lumped together in a BOP basket with other coverages carrying an aggregate limit of financial protection, constraining the potential for a full recovery in the event of a loss, Fergot explains.
Agents have an opportunity to approach these entrepreneurial businesses with expertise, pointing out the inadequacies of off-the-shelf insurance for a startup technology company. “A good door opener is to introduce the necessity of E&O liability insurance—the core coverage most tech startups need but often fail to have,” Fergot points out. “E&O can then be easily endorsed to add cyber and media exposures as they are identified.”
CNA can help agents gain a foothold. “We’ve assembled all the property-casualty insurance coverages needed by these organizations at adequate limits of protection in our TechComplete program,” Fergot says. “Agents don’t need to be sophisticated technology experts—that’s our job. We can walk you through what is needed to provide optimal service as these insureds transition from small to Wall Street.”
There’s another reason why independent agents must become trusted risk and insurance advisers for today’s technology entrepreneurs. “Our work with hundreds of technology-specific agents across the country indicates these customers stick with their agents as their business grows,” Fergot says. “Most start out small and soon become midsize global companies, making them highly profitable accounts.”
Now is the time to build this future.