As your technology business grows, so do the risks. What insurance could you need to help you mitigate these risks as you mature from a start-up to an established organisation?
Founding and nurturing a technology start-up through its growth to a successful and established organisation requires commitment, dedication and innovation. It’s also important to have an understanding of the relevant risks you face as your business grows, as well as the technology insurance solutions which could help to mitigate these threats.
Risks when starting up a technology business
Sole trader vs limited company insurance requirements
Sole trader, a partnership or a limited company? How you structure your business for trading purposes can determine the level of insurance required. Employers' liability insurance is compulsory by law for most businesses. However, sole traders who employ only close family members are not legally required to have it.
Defining and meeting your contractual obligations
Allegations of contract breaches are common in the technology sector. Failure to define your contracts can result in disputes over key contract terms such as payment for your work. But there are certain covers out there that will have your back if things don’t always go to plan.
Protecting intellectual property
For most tech start-ups, intellectual property can be the most valuable asset. You can get specific insurance to protect against IP for if you’ve secured IP rights or if you’re looking to protect yourself against inadvertently infringing the rights of others. To decide if your business could benefit from investing in IP insurance you firstly need to recognise, understand and if appropriate, protect your IP. The Intellectual Property Office (IPO) has a range of free online tools to help you understand more about trade marks, designs, patents and copyright.
As businesses providing products and services, which inherently create, amplify, and attract cyber risks, tech companies are a high-risk target for cyber criminals. It’s no surprise data security and privacy is the number one risk for tech companies. From sharing confidential information with third parties to secure investment to managing large amounts of client and staff data, and of course GDPR, the risk of a data breach can have various financial, legal and reputational repercussions.
Risks for expanding technology firms
Risks with increasing the workforce
Typically, a tech company can only progress so far though without further resources. As technology firms looks to expand and employ personnel providing technical, marketing and/or operational expertise, your original insurance package may not be appropriate to support the legal requirements of your increased workforce. Check with your broker if you have recently diversified or grown.
When it comes to recruiting and retaining skilled tech experts, the talent and skills shortage continues to be a challenge. To help overcome this, tech companies should look to implement a robust employee health and benefits strategy, which will help to attract and retain those essential employees.
Funding and investment is hugely important for technology businesses. Potential investors may well wish to see your insurance credentials and risk management plan before committing to investing. Should you get that investment, you may wish to consider directors and officers’ liability insurance as an extension to your policy to protect your business and personal assets.
As your workforce increases, the need for cyber liability insurance arguably does too. Employees often fall victim to phishing and social engineering attacks which result in compromised system access and data breach. Human error was responsible for 90% of the UK’s cyber data breaches in 2019. Risk management around staff awareness; internal policies; cyber security and breach response plans can also help contribute to an added level of protection.
Risks for technology firms at the maturity and exit stage
As you enter the maturity and exit stage of your lifecycle, the risks already mentioned in this article do not go away. As you grow these risks get bigger and with arguably more to lose, insurance is something you may wish to revisit more frequently, especially with potential turnover of staff, directors and investors, new innovations or further expansion.
Disrupting the way you think about risk
The risks mentioned in the article are by no means exhaustive, simply there to give you an idea of what you could face as your tech business progresses. The risks also do not stop at one stage, they can be apparent through the life of your business and need to be protected against.
The interesting thing when it comes to risks facing technology businesses is that these firms often find themselves operating in multiple sectors. Data processors are no longer just processing data, but are overlapping into software, search and information services, and media. The increasing complexity of overlap among tech sectors further demonstrates the need to understand new liabilities and interconnected risks.
Insurance required for a start up and expanding tech businesses
We always recommend engaging with an insurance broker to discuss your specific business requirements rather than buying ‘off the shelf’ online cover or a ‘blanket’ technology insurance product. You don’t want any nasty surprises if you need to make a claim. And we always suggest you regularly engage with your broker to check your insurance solution may still be suitable for your expanding or diversifying tech business.
Ultimately, insurance shouldn’t be painful. After all, it’s there to protect you. It’s easy to get caught up in the jargon; it can be extremely confusing and overwhelming. Even the tech giants of the world need help with their insurance we’re sure. That’s why our personable experts will provide advice and support in a simple, solution-focused way that works for you. No matter how straightforward or complex your risks are, whether you’re looking for a new policy or to amend existing cover, we can help and we’ll take care of you.
 Marsh’s 2019 CMT Risk Study