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Expanding to the US? Use a local insurance broker

Jonathan Selby - Founder Shield
Jonathan Selby

General Manager

As startups begin to hit scale after their B or C round, many focus on expanding geographically to bolster revenues and put that new growth funding to work. For example, it’s no secret that Israel has a booming venture capital scene and we work with a ton of Series C Israeli startups that are now expanding to open US operations.

For anyone that’s spearheaded a growth operation like this, you know it comes with quite a bit of legal and compliance setup.  One big piece of the puzzle is meeting insurance requirements in these new markets and making sure your risk management program is updated to stomach the new risk exposure.

It’s important to have some feet on the ground in the form of a local US insurance broker as you begin the rollout and compliance process.  As we’ll explain, it can save you some big headaches when operating and growing your new sales arm.

Coverage Territory

While you might assume differently, not all policies contain “worldwide” coverage.  Policies written in non-US jurisdictions may exclude US claims because of its litigious nature. Underwriters and brokers with inexperience in the US legal arena are sometimes hesitant to write policies that cover US operations.

It’s therefore important to work with a US broker as you expand into the US. Domestic US brokers will have access to US-based insurance carriers and specialized programs that foreign brokers will not because foreign brokers don’t have the US licensing to access these carriers.

There’s also a tactical advantage beyond US brokers’ access to US markets: US brokers will be on the same or similar timezone of your US employees. Therefore, when a claim situation does arise, you know that their claims team will be able to jump on it right away and mitigate the damage.

US Legislation

Obviously, the US is a complex insurance market and each state has varying insurance laws. For example, Workers Comp is mandatory in NY and California, but not in Texas. Having a US broker who knows the insurance landscape is key to make sure that you are in full compliance with any contracts, as well as, legislation.

It’s important for any companies with a digital presence to also understand how to protect against claims that can be made under cyber laws in the US.  As the US constitution creates a balance of power between state and federal government, each state has its own data breach processes and regulations. States have varying definitions of personally identifiable information (“PII”) and the notifications that must go out when PII may have been compromised. Having a US broker that understands how to get policies to cover these nuances can be crucial to protecting your company.

Furthermore, employment practices laws vary greatly across the US and the causes of action for an employee to sue the company are much different than those in EU. For example, the “Employment at-will” doctrine only exists in the US (the EU requires “indefinite employment”). Having the proper employment practices insurance in place to cover claims related to your US-based employees is a critical piece to the risk management puzzle as these claims are often hundreds of thousands of dollars at a minimum.

Claims Handling

In the event of a claim brought against the company by a US citizen or entity, the claims process will be handled in the US. It is imperative to work with a US broker who can guide you through the US claims process and help with negotiations between your company and the carrier.  We have an in-house claims team at Founder Shield that is dedicated to facilitating the claims process and guiding our clients through this difficult time.

Secondly, a strong legal team to defend the insured is key. A US insurance broker would have many partnerships with US attorney’s and can recommend a high-quality firm to represent the insured. In the event of a claim, you want a broker who has boots on the ground and can stand by your side as you go through the claims process and Founder Shield can certainly be that rock!.

Local Expertise

As you can see it’s important to have local expertise as you expand to the US market.  When you’re looking for an expansion partner on the insurance front, ask yourself the following questions:

  • Will you have a dedicated point of contact based in the US?
  • Does the broker have a track record of servicing companies who’ve expanded to the US?
  • Will you have a dedicated claims team that can tackle the tough issues as they arise in the new jurisdiction?

If you ask these questions and get solid answers you’ll be putting yourself in a position to succeed and minimize your risk exposure caused by the expansion efforts.

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