Overview of the Financial Services industry

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.

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Some of the biggest risks Financial Services companies face

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. It only makes sense, too, as cybercriminals are becoming more threatening, executing sophisticated and multi-tiered cyber attacks. These threats can add up quickly, causing significant financial damage to an organization.

Complex Regulation Compliance

Most fintech leaders — around 43% — believe that regulations can slow industry growth. With all the hoops to jump through, it’s often tricky to scale internationally as current operations and pre-existing regulations don’t always work well together. Although sidestepping regulatory requirements isn’t an option, financial services companies face bottleneck situations when it comes to regulatory non-compliance.

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. Employee fraud can come in many forms: inventory theft, expense reimbursement fraud, embezzlement, etc. Financial services firms must be on the lookout for inside trickery continually.

Why is Insurance for Financial Services Companies Important?

Risk management programs can quickly flop without adequate insurance coverage in place. This situation means that some financial services companies are at risk of losing massive amounts of revenue and eventually shuttering due to severe financial loss.

Insurance helps to protect financial services companies from third-party financial damage, lawsuits, and accident claims. With insurance as a safety net, organizations can stay in the game for the long run.

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What Insurance do Financial Services companies need?

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How much does Insurance for Financial Services Companies cost?

The cost of insurance for financial services companies will depend on several things, including the company’s size and development stage. Other factors include:

  • Exposures: risks being insured.
  • Company practices: views on safety, compliance, and risk management. 
  • Program structure: the amount of deductible and willingness for a company to assume more risk
  • Claims history: the type and amount of past claims against the company

Types of Financial Services Companies that need insurance

The term “financial services” covers an array of industries. As mentioned, the one making the biggest splash right now is fintech. However, here are a few other financial services companies to consider that benefit from having a robust risk management program:

  • Asset management firms
  • Property & casualty insurance
  • Life & health insurance
  • Financial exchanges & data
  • Insurance brokers
  • Investment banking & brokers
  • Consumer finance
  • Payment brands
  • Accounting firms

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