The financial services industry is in a period of rapid transformation. Projections show global fintech revenues growing to over $1.5 trillion by 2030, driven by the demand for innovative digital banking tools, seamless online platforms, and data-driven insights. While this growth presents exciting opportunities for companies in the financial services sector, it also comes with a unique set of risks, from data privacy breaches and professional liability to intellectual property infringement and cyberattacks. Founder Shield offers specialized insurance for financial services companies, providing the comprehensive protection you need to innovate and scale with confidence.
Whether it’s investment or lending, the financial services industry focuses on managing money and assets. Plus, the age of fintech has spurred this industry onward with significant force. Paypal and Stripe make payments a breeze, whereas Robinhood and Invstr help individuals invest in the stock market via hassle-free apps.
The financial services industry is a current hot spot for startups and “unicorns,” which threaten to disrupt traditional businesses. To accommodate the ever-changing demands of a tech-savvy market, many financial services companies are becoming increasingly diverse. This approach creates a dynamic environment in the industry. Organizations specialize and diversify in hopes of higher yields, fewer costs, and safer investments.
Why is Insurance for Financial Services Companies Important?
Financial services companies can use insurance to protect themselves from various risks, streamline their operations, and build credibility within the industry.
Cybersecurity
From ransomware to malware to phishing (and more), data breaches typically cost businesses an average of nearly $4 million globally. As a result, cybersecurity is a primary concern of financial services companies, which handle sensitive client data like Personally Identifiable Information (PII), bank account details, and investment records. Cybercriminals are becoming more sophisticated, executing multi-tiered attacks that can lead to significant financial damage, reputational harm, and regulatory fines. A robust cyber insurance policy is essential to protect against these growing threats.
Complex Regulation Compliance
Most fintech leaders—around 43%—believe that regulations can slow industry growth. Financial services companies must navigate a complex web of compliance requirements, from federal laws like the Dodd-Frank Act to international standards like the General Data Protection Regulation (GDPR). Although sidestepping regulatory requirements isn’t an option, a simple error or oversight can lead to a lawsuit alleging a failure to comply. This is where Professional Liability (Errors & Omissions) insurance becomes critical, protecting the firm from claims of negligence or misrepresentation.
Employee Fraud
According to the Association of Certified Fraud Examiners, US businesses will lose around 5% of their gross revenues to fraud. When the swindling comes from within the company, it stings even more. Financial services firms are particularly vulnerable to internal threats such as wire transfer fraud, embezzlement, and unauthorized trading. The risk of employee fraud requires constant vigilance and a strong defense, making a robust insurance program a critical component of risk management.
Leadership Liability
Leaders in the financial services industry operate under intense scrutiny from investors, regulators, and the public. Lawsuits can arise from allegations of financial mismanagement, conflicts of interest, or breach of fiduciary duty. A Directors & Officers (D&O) liability policy is essential for protecting the personal assets of a company’s board members and executives, providing them with the confidence to make critical decisions without fear of a devastating personal lawsuit.
Financial Services Insurance Coverage & Policies
These coverages form the foundation of any risk management program for financial services companies:
The potential of a customer being injured while operating a scooter or bike is the biggest risk facing the micromobility space. In addition to the need to insure yourself against this risk, it’s crucial to know that this coverage will be required in at least $1M per occurrence and $2M in the aggregate in every city you wish to operate. Most cities will actually require more.
When employees sustain work-related injuries, employers are typically responsible for their medical costs and lost wages. This policy covers these expenses, protecting employees while keeping companies running smoothly.
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.
Cyber 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.
Whether employees steal from you, a thief robs your armored car, or you receive a forged check or fraudulent wire transaction, money theft happens in many ways. Crime insurance guards your company against damages from these particular crimes.
Shareholders, competitors, investors, etc., can sue a company’s directors and officers, putting their personal assets at stake. Directors and officers (D&O) insurance protects these assets from lawsuits alleging leaders of wrongful acts managing the business.
Whether it’s a devastating fire, natural disaster, or burglary, property insurance responds. This policy reimburses companies for direct property losses, supporting recovery and momentum.
The cost of insurance for financial services companies is highly variable and depends on several key factors. A company’s size, its revenue, and the overall value of its assets under management all play a significant role. The specific risks being insured, or “exposures,” are also a major consideration. An insurer will evaluate a company’s safety, compliance, and risk management practices, such as client data security protocols and adherence to financial regulations, to determine a premium.
The program’s structure, including the deductible amount and the company’s willingness to assume more risk, also influences the final cost. Finally, a company’s claims history—specifically the number and type of past claims—will be a major factor in calculating the insurance premium.
Financial Services Claims & Examples
Navigating a commercial insurance claim is often challenging, often fraught with confusion and multiple unknown factors. The following four-part series outlines the ins and outs of commercial insurance claims:
Professional Liability, also known as Errors & Omissions (E&O) insurance, protects your company against claims of negligence, misrepresentation, or mistakes that result in financial harm to a client. For financial services, this is a critical safeguard. A simple error in financial advice, a miscalculation in an investment portfolio, or a failure to file a document on time can lead to a costly lawsuit from a client. E&O coverage provides a financial safety net for legal defense costs and any settlements or judgments, regardless of whether the claim has merit.
While general liability policies might offer some minor cyber-related coverage, they are not designed to handle the unique and severe risks of a data breach. Financial services firms store highly sensitive information, making them prime targets for cyberattacks. A dedicated cyber insurance policy covers a range of costs from a breach, including data restoration, customer notification expenses, credit monitoring services for affected clients, regulatory fines, and legal fees. Without it, the financial fallout from a single incident could be catastrophic.
Yes, D&O insurance is a crucial form of protection for financial services firms and their leadership. The industry is subject to intense regulatory oversight and scrutiny from investors. D&O policies protect the personal assets of directors, officers, and executives from lawsuits alleging wrongful acts, such as breach of fiduciary duty or mismanaging company funds. It helps attract and retain top talent by providing them with the confidence to make decisions that drive the business forward without the fear of personal financial ruin from a lawsuit.
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Finding financial services insurance coverage doesn’t have to be painful. We aim to make the purchasing experience as streamlined and intuitive as possible.
1
Get a quote
Use our custom-built digital platform to get quotes fast. We automate clerical tasks that plague traditional insurance brokerages, giving us more time to be responsive and alert to your company’s needs.
2
Pair with a specialist
No two organizations are the same. Our team of coverage experts partners with your team to engineer your risk management strategy, together. We take the time to understand the intricacies of your company to get you the best possible coverage.
3
Stay one step ahead
To do better, you need to know better. With changing political, technological, legal, and economic landscapes, staying ahead of the curve is critical.
Our in-house team is tapped into the latest developments in your industry, proactively ensuring you’re covered.
Why Choose Founder Shield?
Founder Shield is a leading insurance provider that specializes in offering comprehensive coverage for high-growth companies, offering numerous benefits and advantages over traditional insurance providers. Here’s a breakdown of some of the key features and benefits that you’ll enjoy with us:
Benefits of Choosing Founder Shield
Industry Expertise
Founder Shield is focused on protecting rapidly evolving financial services startups. We ensure that our products are tailored to meet the unique needs of financial services companies.
Customized Solutions
Founder Shield offers bespoke insurance policies that are designed specifically for each client’s needs, ensuring comprehensive coverage that addresses the unique risks associated with financial services operations.
Fast Quotes
With Founder Shield’s streamlined quoting process, you can receive a personalized quote for your financial services insurance quickly, allowing you to make informed decisions fast.
Ease of Use
Founder Shield’s user-friendly digital platform makes it easy to manage your insurance policies, submit claims, and access important documents whenever you need them.
Dedicated Support
Founder Shield provides exceptional customer service, with dedicated account managers who are always available to assist you with any questions or concerns you may have about your insurance coverage.
Scalable Coverage
As your business grows, Founder Shield’s insurance policies can grow with you, ensuring you always have the right level of coverage for your changing needs.
Founder Shield is a preferred choice for financial services businesses because of our specialization in the industry. We offer flexible and customized insurance policies, a speedy quoting process, and exceptional customer service with dedicated account managers.
Great service – proactive, responsive, go beyond what I have expected from previous providers. The team do a wonderful job
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