I’ve been spending a lot of time mixing with a community of start-ups, enterprises and academics at the technology innovation centre Plexal, part of Here East – a fast growing tech cluster in east London’s Queen Elizabeth Olympic Park. In fact, I’ve taken desk space at Plexal – not just because the working environment and the energy here is quite something – but because it gives us, as an insurer, a chance to add to our understanding of the risks and issues that tech start-ups often face.
Seeing it first hand
For me personally, it’s first hand exposure to how businesses are facing up to the uncertainty swirling around the economy, the journey they are on, and how they respond to those moments of change in their business as they grow.
As an insurance underwriter in the tech sector, I’ve learnt it’s critical that at every change – and before focusing on the next stage of growth – a business takes stock and reviews their risks and understand how those risks are managed. If you like it’s like driving down the motorway and taking a look in the rearview mirrors before accelerating and changing lanes. The problem is, it’s easy for businesses to overlook this stage and press on without considering how the risks to their business have changed and what impact it might have on their insurance.
When first taking out any type of insurance, there is an obligation on a business to provide a fair presentation of risk; making sure all information provided to its insurer is accurate and complete. A business is also obliged to update their policy if there are changes which may materially affect their policy. Failure to do this could lead to their insurance being invalidated. Using a moment of change within a business is the perfect time to check if their insurance is still valid and appropriate.
Moments of change for tech businesses
What are those potential moments of change? Unlike many other sectors, the challenge for the tech industry is that it moves fast, which means change arrives quicker and typically revolves around:
- New investment – companies usually raise money for a specific reason – normally to grow their business – and this growth might have an impact on their risk/insurance. Most investment is to recruit ahead of the curve and bring in new talent to expand existing products, launch new products or services, or simply to allow for a growth in sales. It will be a different company than it was yesterday and this difference needs to be reviewed and reflected within their insurance.
- New activities – working with mentors, consultants as well as accelerators and incubators can help reshape the direction of a company, as can winning new contracts with bigger clients. When there is a change of direction inspired by these activities, an insurance review is needed.
- Expansion – taking on more office space as well as trading abroad will lead to different insurance requirements.
- New regulation – the arrival of new regulation will often mean a business dealing with new potential liabilities. The introduction of the General Data Protection Regulation for example, means companies need to review their data processing policies with their insurance in mind.
It’s important to understand what financial/reputational risks these moments of change or uncertainty create. How will these risks be managed? What is the business already insured for? What needs to be added or updated to a business’s insurance policy to cover the risk?
Time to take stock
At any given ‘moment of change’ for your business, taking stock and updating your insurance before the next stage of growth is an important process, and it’s one that can easily be overlooked. Get it right and it can help underpin your decision making and position your business to take advantage of any future growth opportunities.
Hiscox is here to help tech companies flourish. For more information visit https://www.hiscox.co.uk/business-insurance