This boom creates a unique challenge for those in the hot seat and we have seen first-hand the problems it can create, especially where insurance is concerned.
Insurance Growing Pains
The first potential problem is one associated with growth.
This growth can happen very quickly. With growth comes extra risk. If a tech business grows quickly, it quickly has more staff, more assets, more data, more customers, so on and so forth. The more of each of these creates more risk.
More staff have access to data, more staff to make mistakes, which can potentially result in insurance claims.
The more clients, the more users, the more people are affected when things go wrong, the more people to contact.
If you are growing quickly, it is imperative that this risk is managed and one way to manage risk is through insurance.
Reviewing your insurance cover once a year may not be enough. Ideally, there should be continuous engagement both within the organisation and with external insurance providers, to keep asking the question; Is the current insurance still suitable?
It is not unusual for insurance packages to need to grow with companies. Often, as a company grows in size and effectively has more to lose. It is important the levels of insurance are increased to reflect the size of the company and risk presented.
Insurance and then Investment
Sitting on the other side of the fence, we see the problems this growth can create when it comes to companies taking the next step. Often, the fantastic entrepreneurs driving the tech boom in the UK are innovative and experts in their field. But not experts at insurance and risk. That’s no surprise; you can’t be a jack of all trades.
We have however, seen investors refuse funding or delaying the release of investment funds until insurance is in order.
That’s no surprise, why would investors release precious funds to a tech firm who doesn’t have the necessary protections in place. Ultimately, any business no matter how big or small is unnecessarily exposed if its insurance provisions are not correct.
Some investors, such as Venture Capitalists have now got wise to these problems. Perhaps an investment turned sour, due to insurance failings. Some now appoint insurance professionals to audit the insurances that any tech firm has in place prior to investment and remedies must be actioned in a timely manner.
The idea being that the investor will benefit from the boom of the tech firm’s growth and not the boom when things turn sour!
For more information on the insurance of software firms, please click here, or if your firm is more akin to a Fintech company, please visit our Fintech webpage.
