Insurance Guide for Digital Health Companies

Technology is helping people around the world gain more access to healthcare. It also makes healthcare more affordable and convenient for patients and providers. In turn, these dynamics give medical providers, health software companies, and virtual health businesses more access to patients and their data than ever before. What does this mean for your digital health company?

However, more opportunities typically mean more risks for your business. Digital health companies must understand common risks for virtual medicine and how to protect against them, from technology failures to data breaches. This post reviews the unique risks digital health companies face and insurance solutions to help protect your business.

Understanding the Digital Health Landscape 

There’s no doubt digital health companies are changing the healthcare landscape. Let’s take a look at some recent data on the digital health market:

  •  $38 billion: The estimated US digital health market size in 2025.
  •  7 million patients: The estimated number of telehealth patients in 2018 — trends have stabilized at 38% higher than before the pandemic. 
  •  45 million patients: The estimated number of patients using a remote patient monitoring (RPM) device in 2022, like a continuous glucose monitor.
  • 93% of physicians: Percentage of physicians who see a definite advantage or some advantage to using digital health tools in 2022.

digital health companies

Source: McKinsey & Company

What does this data mean? In short, the digital health industry, from wearable health monitors to virtual health visits, is on track to continue steady growth.

However, with a growing market comes more competition for digital health startups entering the field. Funding for digital health companies has slowed down in recent quarters. In the last quarter of 2021, the average funding deal for digital health companies was $41 million. In Q2 of 2022, the average size dropped to $31 million and it’s expected to dip down more as we end 2022. 

For digital health startups and entrepreneurs looking for funding, it’s more critical than ever to offer a quality product, demonstrated revenue growth, and an asset protection plan through a robust insurance strategy.

Risks Digital Health Companies Face

As digital health companies continue to evolve and innovate, it’s vital to recognize the exposures within this industry. Whether your company provides Software as a Medical Device (SaMD), IT solutions for healthcare companies, or telehealth to patients, technology-driven health businesses face unique risks.

Privacy and Cybersecurity

Perhaps the largest and most important task of a digital health company is keeping data secure and safe. App users, patients, and other clients entrust their personal health data to your business. You need to adhere to best practices to prevent a cyber attack or data breach from compromising your clients’ privacy.

However, privacy isn’t the only cost of a cybersecurity breach. In 2022, the average cost of a data breach in the United States costs nearly $9.5 million, according to IBM. Additionally, a breach of health data could lead to regulatory issues, such as HIPAA violations.

Technology Failure

Businesses that rely on technology understand the importance of planning for the unexpected. A failure in the technology that powers your business could lead to expensive damages.

With so many people using telehealth or virtual doctor visits, for example, something as simple as an internet outage could cause massive problems. With no internet access or a weak connection, healthcare providers can’t access their patients properly. This disconnect could lead to a scheduling nightmare as patients try to reschedule appointments all at once. Worse yet, misdiagnosing a patient due to technology failure is an unwanted reality for digital health companies.

Digital health companies need to be aware of potential technology risks and establish safeguards as much as possible. This approach might include purchasing backup server equipment and a top-notch IT team to take care of technology issues speedily. Leaders can also create a liability insurance plan that helps protect your company’s assets if a technology failure causes damages.

Product Malfunction

In addition to the technology that runs your business, leaders must know the risks of a product failing or malfunctioning. This knowledge is vital for digital health companies that provide wearable tech or monitoring systems.

For example, suppose you offer a continuous glucose monitoring system for diabetes patients. A product failure could potentially endanger your customer. If your product fails to alert the patient of a drop in their blood sugar levels, they could potentially go into hypoglycemic shock.

Misunderstandings or Miscommunications

Misunderstandings and miscommunications are a risk for traditional and digital health companies alike. Health complications can occur if the patient and healthcare provider aren’t on the same page.

Suppose a telehealth patient relies on an older computer system to connect with their doctor. The video and audio feed from the patient are difficult to see and hear, causing the doctor to mishear an answer to a health question. This disconnect leads them to misdiagnose the patient’s condition, which prolongs the patient’s symptoms.

Recommended Coverage for Digital Health Companies

Digital health companies face many, many risks, especially when reliant on innovative technology. Fortunately, a commercial insurance strategy works to protect your business from financial harm. While every business is unique, there are a few insurance policies we recommend for your digital health company.

General Liability

General liability offers broad protection against some of the most fundamental risks companies face. Known as “slip-and-fall” or “all-risk” insurance, this policy covers personal or property damage and bodily injury occurring on the business premises.

Workers’ Compensation

When employees sustain work-related injuries, employers are typically responsible for their medical costs and lost wages. Workers’ compensation covers these expenses, protecting employees while simultaneously keeping companies running smoothly. Most states (except for Texas) require this coverage for businesses with employees.

Cyber Liability

Cyber liability insurance protects companies from third-party lawsuits relating to electric activities (i.e., phishing scams). Plus, it offers many recovery benefits, supporting data restoration and reimbursement for income lost and payroll spent.

Errors & Omissions

Professional liability, also known as errors and omission (E&O) insurance, covers companies in third-party or client lawsuits claiming substandard work or service. Work errors or oversights, missed deadlines, budget overruns, etc., often result in costly cases — but E&O insurance responds to these mishaps.

Employment Practices Liability 

Any company with employees faces the risks of allegations, such as discrimination, wrongful termination, breach of contract, etc. Employment practices liability (EPL) protects companies against lawsuits related to employment practices. 

Other Digital Health Insurance to Consider

Depending on the nature of your digital health company, you may also need specialized insurance coverage to mitigate specific risks. Some common insurance policies for digital health businesses include:

  • Product Liability: This policy helps protect your business from lawsuits if your product fails or malfunctions, causing damage to users.
  • Medical Malpractice & Professional Indemnity: Like traditional medical providers, digital medical professionals should protect themselves against malpractice claims.
  • Virtual Care and Telemedicine Insurance: Telehealth insurance provides liability coverage for specific risks faced by telehealth companies, such as miscommunications or technology failure.

Understanding the details of what coverage your company needs can be confusing. Founder Shield specializes in knowing the risks your industry faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you.

What to know more about insurance for digital health companies? Talk to us! Please contact us at or create an account here to get started on a quote.

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