Security & Fraud

InsurTech Players Turn Their Attention To Startups

Vouch CEO On Meeting Startups’ Insurance Needs

In the land of startups, speed matters. Scale matters. Funding matters.

But the other nuts and bolts of running a business require attention, too. That includes insurance, which of course protects against the unexpected and unplanned events that occur while running a business.

Vouch Insurance, which offers insurance to high-growth technology firms through an online platform, said last week that it has raised $45 million in a funding round, and has expanded its service into California.

The total raised to date comes in at $70 million.

The company’s platform offers insurance for general liability, management liability, cybercrime and a range of other coverage. The plans start at a few hundred dollars a year.

In an interview with PYMNTS, Sam Hodges, CEO, said that high-growth tech firms, which are evolving quickly, may find that their insurance needs also evolve quickly, as they move across various stages of raising equity capital and bring on managers and directors (thus: management liability). They may find that insurance needs change, too, as they enter new partnerships across eCommerce or payments that can be critical to helping the business grow (which would lend a sense of urgency to errors and omission coverage).

Against that backdrop, “traditional insurers think about technology in a very monolithic – and, I would argue, old-fashioned – manner,” Hodges told PYMNTS. “They tend to put all tech companies into just a few different classes. As a result, they are not able to distinguish the risks and approaches one should take in underwriting the eCommerce company on one hand versus the digital healthcare company or FinTech company on the other hand.”

As a result, Hodges noted, insurance policies can be mispriced or might be less than ideally tailored for these firms.

Vouch, he said, offers a unified online experience in adding to existing coverage or in researching and selecting coverage for the first time. The process is done across a span of minutes as opposed to the weeks or months it would take to go through a traditional broker. As Hodges pointed out, Vouch has reviewed insurance that is in place at more than 150 companies, along with those firms’ actual needs and data collection efforts. In the majority of cases, these companies are over- or under-insured – and in both cases, that’s a real problem.

Delving into the Mechanics

Hodges was quick to point out that Vouch does not act as a broker, but has built tailored insurance programs that serve clients’ needs directly, where coverage is recommended based on what the firm has learned about the startup and is tied to the decisioning model that underpins the platform. The policies are backstopped by Munich Re, which is among the largest re-insurers in the world.

Hodges said that, increasingly, startups are being held to the same standards as more mature companies.

Asked about a near-term roadmap, and moving beyond the recent announcement centered on California, he said Vouch will have a broader, national footprint by the middle of next year, and will remain focused on high-growth tech firms.

“On a longer arc, I could certainly see us operating in geographies outside the United States,” Hodges told PYMNTS, noting that many tech markets are global, as are their labor pools. Many founders are operating their businesses, from day one, with the ambition of entering an international setting.

Hodges added that Vouch is seeing startups initially obtain basic coverage, only to return within a few months to ask for increased limits and broader coverage. Growth has been notable across eCommerce and the B2B spaces.

Obviously, not all startups work out – but, as Hodges told PYMNTS, if a startup should fail, it should be for the right reasons.

“The failure should not be due to an insurance claim that wasn’t covered by the insurance policy – nor should they fail because they take risks that they don’t fully understand.”

——————————–

Featured PYMNTS Study: 

With eyes on lowering costs to improving cash flow, 85 percent of U.S. firms plan to make real-time payments integral to their operations within three years. However, some firms still feel technical barriers stand in the way. In the January 2020 Making Real-Time Payments A Reality Study, PYMNTS surveyed more than 500 financial executives to examine what it will take to channel RTP interest into real-world adoption. Here’s what we learned.

TRENDING RIGHT NOW