Buying startup company insurance can be a daunting task.  The insurance market is fragmented and there is no shortage of products out there.  The industry is not exactly tech savvy either, and many brokers still employ tools as archaic as fax machines in their practices.  Just finding where to start can be a hassle!

When it comes to pipeline pharma, especially within biotech companies, navigating the right insurance policies becomes even more critical.

Discover the essential guidelines for acquiring the best insurance for startups. Uncover the key dos and don’ts when securing coverage for your burgeoning company.

1. Dos

a. Vet Your Broker

When you purchase EPL insurance, you have to hire a broker to approach the right insurance companies on your behalf. You should make sure that your broker fully understands your business model and where the inherent risks to your company lie. Sometimes these liabilities may even be more nuanced than originally expected, and finding the right broker to flush out those risks and make sure they’re mitigated is key.

It’s important to make sure you feel good with this partnership because having to explain and re-explain your business to every broker you work with just causes more headaches down the road. You want your broker to be in your corner and excited about your business and the roadmap moving forward.

b. Ask Questions

Once you’ve found your broker, don’t hesitate to dig into the coverage and ask questions. Insurance should be viewed as an investment rather than just another cost, and your broker should know this. Ensure that you’re making the right investment. You want the right coverage for your risk profile, effective risk control measures, flexibility to modify coverage as your company changes, and scalability to add coverage as your company grows.

2. Donts

a. Go to Multiple Brokers (at first…)

The usual method of shopping around doesn’t really work in your favor when buying insurance for your startup company.  Here’s why:

When a broker approaches an insurance carrier on your behalf, they become the exclusive “broker of record” that’s allowed to talk to that carrier.  Only one broker can talk to any one carrier at any given time.  This ensures your broker has the chance to make his/her case on your behalf without any background noise.

When you approach multiple brokers at the same time, they’ll almost certainly go to the same markets (those that are best for your specific startup) assuming they know what they’re doing.  Depending on the order in which you approached each broker, each will be blocked at certain markets because another has already approached them.  The pipeline gets clogged and your time/energy gets wasted.

Again, this is why vetting your broker and sticking with him/her is key. You want to make sure that you go with a broker that has strong underwriter relationships with the carriers most relevant to your startup company, including those that offer start up tax credits. The application can be annoying and you don’t want to do it more than once. The right broker will leverage the right underwriters at the right carriers the first time, saving you valuable time and effort, and helping you to maximize your start up tax credits.

If your broker strikes out on finding the right policy related to sample insurance requirements, it’s time to consider approaching another broker. Here’s a valuable tip for this situation: be sure to request the previous broker to provide you with all the applications that were submitted on your behalf, along with a comprehensive list of declining carriers. This proactive step will significantly streamline the process moving forward.

b.  Withhold Information

This seems to come as a surprise to many but underwriters require quite a bit of information to create a coverage proposal.  This is particularly true for policies that are extremely important for most startups, such as technology errors or omissions insurance, cyber liability insurance, or directors and officers insurance.  Don’t be surprised if you’ll need to submit things like financial statements, sample customer contracts, written HR practices, and investor decks.

To optimize your chances of securing favorable terms and premiums for your insurance coverage, it’s crucial to provide your broker with comprehensive information. Armed with a thorough understanding of your risk profile, your broker can effectively advocate on your behalf with the underwriters. Avoid the unnecessary hassle of withholding information, as the underwriter will likely request it eventually, prolonging the process. Streamline the communication by proactively addressing all underwriter queries, ensuring a swift and efficient turnaround for your formal proposal. This approach not only saves time but also enhances your overall proposal insurance experience.

So those are some basic pointers related to buying startup company insurance.  Hopefully these help make your insurance purchasing process as smooth and seamless as possible!