2nd Annual Embroker Vertical Insurance Index: Startup Snapshot provides real-world data on how and why founders make insurance coverage decisions
Embroker, the digital platform making it radically simple to get business insurance, today released an analysis showing that as startups raise more venture capital funding, coverage costs can increase by over 150%.
The new report, titled 2nd Annual Embroker Vertical Insurance Index: Startup Snapshot, documents the corresponding fluctuations in average premiums, limits and retentions for different lines of business insurance as VC-backed startups grow in revenue, headcount and funding.
The Startup Snapshot encompasses two years (2020-2021) of insurance purchasing data generated by almost 5,000 Embroker individual policyholders, which include early-stage pre-revenue companies to companies with over
Key findings from the report reveal the premium impact for different stages of a startup, demonstrating how milestones in business growth trigger risk:
Employment Practices Liability Insurance(EPLI): As companies grow and hire more employees, risk within the workplace has the potential to increase. With employees returning to the office, many for the first time in two years, issues for both in-person and remote employees can resurface. Embroker data shows that EPLI premiums increased by 76% on average when the company headcount went from 10-30 employees to 30+ employees. EPLI had the lowest year-over-year premium change from 2020 to 2021 with a 7% increase in average premiums.
Directors and Officers (D&O): More funding equals more responsibility. As startups hire more executives and add more board members or directors, they need to account for that additional exposure. D&O premiums increased over 155.5% on average when startups go from
$5M– $25Min funding to $25M+ in funding. Across the board, D&O premiums increased 9.5% year-over-year compared to the analysis in March 2021.
Technology Errors and Omissions (Tech E&O, includes Cyber): As a startup brings on more customers and increases its revenue, the opportunities for project issues, product defects and breaches of contract rise. This sort of exposure means a company needs to expand protection from errors and omissions. E&O premiums raise 242% when startups go from
$0M– $1Min revenue to $5M+ in revenue. On average, all startups regardless of growth stage paid $8,061in annual premiums in 2021, which is a 9% increase from 2020.
Estimated total insurance spend by startups: Based on the average annual premium paid for core startup business insurance (D&O, EPLI, E&O and Fiduciary Liability),
U.S.-based venture-backed startups are estimated to be collectively paying almost $1.5 billionin premiums every year.1
Over the past year, venture-backed technology startups have enjoyed a record fundraising environment –
The intersection of this unprecedented growth in funding and increase in business risk heightens the level of responsibility for startups to protect their business, investors, employees and intellectual property.
“The last couple of years have been very favorable for startups due to a positive fundraising environment and market tailwinds. To continue this growth, they now have to navigate both opportunities and new threats. The data in our new benchmarking report shows how startups are being calculated in dealing with the issues that can threaten not only continued growth but the company’s very existence,” said
“Running a startup in today’s market is filled with risk – good risk and bad risk,” continued Miller. “Ask many successful founders and they will likely say that they very much embrace risk. That’s because the act of taking risks, intelligently and without fear of truly devastating consequences, is the very basis for progress and innovation.”
“Our focus at Embroker is working with founders to approach risk in an intelligent and calculated fashion so they can take the risks needed to thrive while managing the potential downsides of these and other risks. This means making business insurance not just about mitigating risk, but making better business decisions as companies grow, and enabling founders to focus on how their business can truly make an impact on the world.”
To provide more transparency to the business insurance process, Embroker offers a Startup Package Calculator, that takes data from the report and allows founders to see insurance data that is customized to their specific startup based on their revenue and funding.
Embroker is transforming commercial insurance by making it radically simple for businesses to get the right insurance at the best price. Embroker focuses on industry-specific coverage for the most complex and inefficient lines of insurance, such as Directors and Officers, Employment Practices Liability, Cyber, and Professional Liability. Embroker uses predictive modeling powered by proprietary technology to fully automate underwriting and make the buying process simple, fast, and more affordable. Through Embroker Access, Embroker provides partner agencies and wholesalers with the capability to offer all of Embroker’s industry-leading insurance products to their customers. Founded in 2015, Embroker is headquartered in
1 Estimated total insurance spend by
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