Four Small to Medium Business Insurance Types, Explained

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By The Boost Team on Mar 10, 2023

10 min read

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From accidents to theft to lawsuits, there are plenty of scenarios that could result in unexpected costs for a small to medium business (SMB). Insurance is a vital tool for SMBs to protect themselves and their employees from potentially serious financial losses.

However, with so many kinds of SMB insurance products on the market, it’s not always clear which types a certain business may need. In this blog, we will outline four useful insurance products and explain which kinds of companies would most benefit from having them.

1. Cyber Insurance

With 98% of businesses having an online presence, and many businesses storing sensitive customer and company data in internet-accessible databases, cyber insurance has never been more relevant or necessary. As the world becomes even more digital, the volume, sophistication, and frequency of cybercrime are rising, and the need for cyber protection is growing in equal measure.

When a company experiences an attack on its digital property, the cost can be devastating. In 2021, the average cost of a data breach hit $4.24M, and on average, it takes a minimum of two years for SMBs to pay off the cost of a data breach.

What is cyber insurance?

Commercial cyber insurance is a product that helps businesses financially protect themselves from the risk of cybercrime. Similar to any other insurance product, companies can save themselves from exorbitant expenses in the event of a cyber attack by making regular premium payments. A cyber insurance policy typically covers expenses such as:

Breach Response Expenses: This can cover the forensic expenses to discover exactly what happened in a breach situation, as well as the cost of notifying individuals affected, monitoring customer credit, overtime salaries for employees handling the breach, call center expenses, public relations expenses, and more.
Cyber Extortion: In the event of cyber extortion where certain information or capabilities on the business’s website are being held for ransom, this coverage includes the forensics, interest, and negotiation expenses in an extortion event. This can include a certain amount for ransom demands.
Replacement or Restoration of Electronic Data: If electronic data or programs are damaged or lost due to a cyber attack, a cyber insurance policy can cover the cost to replace or recover those directly impacted by the incident.
Business Interruption and Restoration: The loss of revenue due to disruption of the business, impaired customer retention and acquisition, and damaged reputation can cause ongoing financial hardship. This coverage includes the cost of getting a business up and running again after a cyber incident. If a business is interrupted for longer than a certain period of time, this kind of coverage may also pay for revenue lost during that time.
Defense, Fines, and Penalties: There are often various fines and penalties associated with cyber attacks. Insurance can cover the cost of defending a company if the breach results in a regulatory proceeding, and also the cost of potential resulting fines or penalties.

Even more comprehensive policies might reimburse a business if its money is stolen in a fraudulent transaction. One example would be if a company’s email is hacked, and the scammer uses it to initiate a fraudulent bank transfer. Other policies can include coverage for hardware replacement if computers were permanently damaged, higher ransom payments to regain control of systems or data after a ransomware attack, or reimbursement if a scammer tricks the business into sending money.

What companies should have cyber insurance?

Any company with an online presence can and should have some form of cyber insurance. If a company has a website where it conducts business—making transactions, storing information, or communicating with customers—or if it uses a cloud storage system to house critical information, that company would benefit from cyber insurance.

Large corporations tend to be more appealing targets for cybercriminals because criminals can make more money per hack. However, SMBs are also frequently attacked, which can be far more detrimental for those companies. Because SMBs don’t have as much expendable income as larger corporations, the loss can have deeper, longer-lasting financial repercussions.

What cyber insurance products are available?

Traditional insurers tend to create products that only cater to large corporations both in coverage options and pricing, which has historically left the SMB market significantly underserved and overcharged.

However, the landscape for SMB cyber insurance is changing, and more digital, customizable cyber insurance products are becoming available for a wider variety of businesses.

2. Business Owner's Policy (BOP)

Running a small business comes with a lot of risk. For example, if a customer were to slip and fall on the floor of a hair salon, they might bring a personal injury lawsuit against the business. If a coffee shop’s espresso machine breaks down, the cost to replace it might be substantial (not to mention lost revenue while the shop couldn’t serve espresso). For an SMB, these kinds of costs can endanger the entire company. It’s far better for companies to err on the side of caution and protect against these risks, and for that, BOP insurance is essential.

What is BOP insurance?

BOP insurance exists to protect a company’s assets and operations. By paying a monthly premium, businesses can protect themselves from larger expenses if a covered incident occurs, such as:

Bodily injury that occurs on the business’s premises
Property damage
Personal injuries (such as defamation or infringement)
Damages caused by the business’s products

BOP insurance policies often have options for additional endorsements such as cyber, that provides basic protection against cyberattacks, or crime in the event of robbery, theft, counterfeit money orders, forgery, or unauthorized credit card use.

Depending on what industry the business is in, it could also have industry-specific coverage. For example, a restaurant might add endorsements that would cover losses related to food contamination. A retail store might add an endorsement to cover related costs if one of their products is recalled and must be withdrawn.

What companies should have BOP insurance?

Every SMB should have BOP insurance, but what varies is the level of complexity depending on the size of the business. For example, a self-employed freelancer would have different coverage from a medium-sized startup with a hundred employees. The needs of SMBs will be different as well, and the products available to them are unique.

What BOP insurance products are available?

Digital insurtech providers of BOP insurance typically build easier-to-understand products that are made for freelancers and gig economy workers, and can be configured online. These products often aren’t enough for SMBs' needs—they only offer a limited amount of coverage, and often exclude risks that SMBs frequently encounter.

On the other hand, legacy insurance providers of BOP typically build complex products that are too expensive and too complicated to understand without the help and recommendations of a traditional insurance agent. In many cases, the coverages and limits they offer are overkill for SMBs.

Options are more limited for single-location small businesses, but as the insurtech industry expands, more digital-first BOP insurance products are entering the market that cater specifically to the SMB market.

3. Management Liability Insurance

Allegations of employment discrimination, wage disputes, and sexual harassment are only a few of the issues that can spark a lawsuit, and all are expensive to defend against.

In 2022 alone, workplace settlements cost companies nearly $2 billion combined. From big corporations to start-ups, a workplace lawsuit can be a major financial liability. Even if a company has done nothing wrong, the cost of legal defense can endanger the entire business, and cost thousands, if not millions, of dollars.

What is Management Liability?

Management liability insurance is a collection of coverages designed to mitigate the cost of lawsuits against the company—specifically related to upper management. That means that if the company is sued, the insurance may cover legal fees, settlements, and other related costs. The three most common coverages included in management liability insurance all cover a different type of lawsuit:

Directors and Officers (D&O) insurance: This is a type of liability insurance for a business’s senior management in case they are sued for something related to their duties managing the company. This coverage frequently applies to both personal lawsuits against the directors and officers and lawsuits against the company related to their actions.
Employment Practices Liability (EPL) insurance: This protects the company from the cost of being sued for things related to hiring or personnel practices. This can include lawsuits alleging things like wrongful termination, discrimination, harassment, and other employment-related issues.
Fiduciary Insurance: This protects the company from the cost of lawsuits related to mismanagement of the company benefits plan. This can include anything from bad 401(k) investments to wrongful denial of benefits.

Some management liability packages may also include non-lawsuit-related coverages, such as a type of crime insurance that covers kidnapping for ransom and other specific crimes against a company’s senior management.

What companies should have management liability insurance?

Any business with a management or leadership team should have management liability insurance. Companies with a C-suite, board of directors, or strategic investor partners could benefit from the protection that management liability offers. What SMB management liability insurance products are available?

The small to medium businesses that are most likely to need management liability insurance are startups. However, this market often has a difficult time finding a suitable policy.

Because most available management liability insurance products were created for larger companies, these products evaluate the level of risk associated with the business based on things like how long the company has been in business, how many employees they have, and their revenue numbers. Since startups often have little or no revenue and relatively limited business history, these kinds of underwriting factors often lead to startups being flagged as very high risk. When a company is flagged as high-risk, they will either be denied coverage altogether or, if they do get approved, the policy they are offered may be extremely expensive. Many startups simply can’t afford it.

A secondary challenge is how coverages are sold. It can be difficult for startups to understand what coverages they need because most distributors sell D&O, EPL, and Fiduciary coverages as separate products without a clear explanation of how they work together. This can be a barrier for these businesses getting the protection they actually need.

However, there are management liability insurance products on the market that cater specifically to startups. These products package the three coverages as a unit so they are easier to understand, and they use alternative datasets to better evaluate startup risks. That being said, it’s important for startups—and companies that cater to startups—to do their research and find a product that fits their business.

4. Parental Leave Insurance

Parental leave is the third most requested benefit for US workers, but according to the Bureau of Labor Statistics, only 23% of privately employed U.S. workers had access to paid parental leave benefits in 2021.

In the absence of a national parental leave solution, it’s up to the private sector to find ways to support new parents in the workforce. Some companies offer self-funded paid leave to employees, but for many SMBs, this can be prohibitively expensive.

What is Parental Leave Insurance?

Parental leave insurance is a business insurance innovation designed to make parental leave affordable specifically for SMBs. The company chooses a package that covers the kind of leave they want to offer their employees, including factors such as what percentage of their employee’s salary to pay during leave, and how long employees can take leave.

Once the policy is customized and purchased, the SMB simply pays the insurance provider a recurring premium based on their selected benefits and employee demographics. When a covered employee takes parental leave, the company files a claim through their insurance provider’s claims process. Then the company will be reimbursed for the cost of paying the employee during the covered leave period, up to the contracted amount.

What companies should have parental leave insurance?

Every SMB can and should offer parental leave insurance. It is an important benefit for employee acquisition, retention, and overall satisfaction. It’s a solution that mitigates the large, unexpected leave costs that often prevent SMBs from being able to offer this benefit. With a parental leave insurance product, the employer can avoid unexpected costs by paying a regular premium, and they can rest easy knowing their insurance policy will protect them.

What parental leave insurance products are available?

Boost’s parental leave insurance is a first-of-its-kind product and is currently the only parental leave product on the market. It is specifically designed for SMBs and fills an important gap in the market.

Seeing as there is no national parental leave program or solution, the other options for parental leave include short-term disability, a combination of state-funded parental leave and PTO, and the Family and Medical Leave Act, which legally gives 12 weeks of protected, unpaid parental leave wherein the parent cannot lose their job during that time. However, most people cannot afford to go 12 weeks without pay. In short, parental leave insurance is a great option for SMBs who are looking to provide an equitable solution to their employees.

All businesses need protection against unexpected financial loss, and SMBs are no exception. When something does go wrong, the right insurance products can be a crucial support for SMBs getting back to business as usual.

If you cater to small to medium businesses and want to learn more about how you can grow your revenue by offering insurance—including but not limited to cyber, BOP, management liability, and parental leave— contact us, or dive into building your insurance program with Boost Launchpad.

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Offering Insurance: Build, Partner, or White-Label?

Nov 1, 2021

So you’ve heard that the insurance market is set to pass $700B gross written premiums this year and that changing consumer expectations are creating big opportunities for companies that haven’t traditionally offered insurance. Now what? If you’re ready to get started with offering insurance, your options fall into three general buckets: build and sell the insurance product yourself from scratch, partner with an insurance company to offer their product, or work with an insurance-as-a-service provider to offer white-label insurance products. So, which is right for your business? We’ll go through what’s involved with the top 3 options, as well as some pros and cons to be aware of. Your first option for offering insurance to your customers is also the most intensive: you can create the insurance products you want to offer, in-house. With this option, you would essentially create a business within a business: an insurance agency that operates as part of your company. As with most business-DIY options, the big advantage of building your own is that you can create exactly what you want. You’ll be responsible for the concept, design, operations, compliance, and tech, so you can approach each area in a way that centers your business needs. Building a new business from scratch is never easy, but insurance is a particularly difficult vertical to get into. It’s complex and heavily regulated, and getting started requires a significant investment of time and money. How significant? Here’s a quick overview of the steps you’d need to follow to create your own insurance products and offer them on your website. All in all, you’re looking at a multi-year timeline to build your insurance products in-house from scratch, with a considerable financial investment as well. And that’s not even considering the ongoing financial investment to maintain them - long-term program management requires significant resources. Besides just the effort involved, the long lead time for getting an insurance product to market means that by the time you get there, the market may well have changed. On top of time concerns, there’s another disadvantage you should weigh before going the build route. Everything we just covered about starting your own insurance program probably falls outside your company’s core business and specialization. What’s more, recruiting and hiring the right people to manage it may be significantly more challenging than hiring the right people for your core business. It’s often difficult to know what to look for when hiring for a completely different skill set, outside your core industry. Once you’ve brought all these new people on board, you’ll also have to manage them in an area where your core leadership has little experience. Consider whether the benefits of building it yourself outweigh the inevitable distraction of running an entirely separate secondary business within your company. Instead of creating an insurance product yourself, you might choose to partner with an established insurance company to offer your customers their product. In this scenario, you would have a link on your site for the customer to buy insurance. When the customer clicks it, they would be taken to the insurance partner’s website to buy the product from them. This is sometimes called affinity marketing, or click-through affinity. In this situation, you would be essentially acting as lead gen for your insurance partner. Your partner may pay you a certain amount per click, but after that you would not participate in the transaction. Your insurance partner would complete the transaction, collect the premiums, and own the insurance relationship with the customer. A click-through insurance partnership like this is both fast and simple to set up. After you’ve worked out the details of the partnership agreement, all you’ll need to do is add the link on your website to direct customers to the insurer. A partnership like this is also relatively low-commitment. Because you’re simply passing web traffic on to the insurer, you can later switch insurance partners or even remove the insurance option from your site altogether with a minimum of disruption to your business. The easy setup of a click-through affinity partnership also comes with considerable drawbacks. Because you’re just providing a link to your partner’s signup form, you lose control of the customer immediately after they click the link. Whatever comes after that is up to your insurance partner. If the customer has a negative experience during the process, it might reflect badly on your brand for offering the referral. Even if the experience is a good one, losing control of the customer comes with another big downside: you also lose control of the revenue. The insurance customer relationship will be with your partner, and they’ll collect the premiums. While a click-through partnership is a fast and straightforward way to connect your customers with insurance, it also removes one of the major benefits of offering insurance on your site in the first place. With this option, you won’t see the kind of regular recurring revenue that you would if your company were able to collect the premiums. Further underlining that it’s not your product (or your customer), with this kind of partnership you’ll have little to no input into the insurance product you’re offering. Your insurance partner will build, develop, and sell the products that best fit their business interests, which may or may not be a good fit for your particular customers. As just another marketing partner, you won’t have much influence to try and get a product created that closely matches what your customers need from insurance. A relatively new third option is to work with a company that offers insurance-as-a-service, and white-label the insurance product they provide you with. If you aren’t familiar with insurance-as-a-service, it generally works like this: insurance-as-a-service providers are companies who have already done the work we outlined in Option 1 (Boost is one example). They’ll have all the necessary state licenses to create their own insurance products, and they will have already negotiated with licensed carriers to back those products. A good insurance-as-a-service provider will also already have built the necessary technology to offer an embedded insurance product experience. Your company can then sign on with the provider to offer one or more of the insurance products they’ve created, under your own brand name, on your company’s website or app. Unlike affinity partnerships, partnering with a white-label insurance-as-a-service provider doesn’t simply generate customers for someone else. Your company will be the one selling the insurance product, on your own website. The customer will buy the policy from you, and you’ll be the one to collect the premiums and own the ongoing customer relationship. White-labeling an insurance-as-a-service product offers many of the advantages of building it yourself, but at a fraction of the time and cost. Because your partner will have already done the heavy lifting on things like operations, technology, compliance, and capital, you can easily offer the right insurance products for your customers - and get to market in a dramatically shorter timeline versus trying to create an insurance company from scratch. A white-label insurance product also allows you to reap the full business benefits of offering your customers insurance: While white-labeling an insurance-as-a-service product is much faster and easier than building one yourself, it’s still more involved than simply adding a link to your website. Working with an insurance-as-a-service provider may take longer to implement than partnering with an insurer for click-through affinity since you will be building the full experience into your website rather than just linking out to an insurance partner's website. Selling white-label insurance policies also requires an important additional step: someone at your company will need to be licensed as an individual broker, and then sponsor a license for your company. You may recall this as Step 1 in the build process - the broker license is required to legally sell insurance, which your company will do with its insurance-as-a-service products. This sounds much more intimidating than it actually is. The insurance licensing process itself is relatively simple and straightforward. However, it does require additional effort from one of your employees (usually a senior executive who is unlikely to leave the company). The other good news is that not only is the licensing process easier than it sounds, but once it’s done, it’s done. You’ll need to maintain it with fees, renewals, etc, but you won’t need to go through the process again as long as that employee is still at the company. A good insurance-as-a-service partner will also help you with this step, so you can check the box and start offering insurance to your customers as soon as possible. The insurance market is changing quickly, and there’s never been a better time for new entrants to take advantage of the embedded insurance opportunity. Depending on the route you take to get there, however, the cost, time to market, and experience for your customers can vary a great deal. When starting on the road to offering insurance, it pays to carefully consider your budget, your timeframe, and your business goals, so that you can choose the option that’s right for your company. Is insurance-as-a-service the right option for you? Boost can help get you started. Contact us today to learn more about your options for offering the different ways to offer insurance with one of our Boost product experts.

The top 3 takeaways from our embedded insurance consumer survey

Embedded Insurance Survey Results: What We Learned From Consumers

Feb 3, 2023

You may have heard that embedded insurance is a big opportunity to grow your business, but are your customers actually interested? We wanted to get the story straight from the source, and so in Q4 2022 Boost surveyed 650+ US consumers. We asked about their experiences with insurance, how they felt about their current insurance options, and what mattered most in their insurance purchases. Here are the top 3 things that we learned from our consumer insurance survey results. [See Full Size] In our insurance survey, a whopping 73% of consumers had either already bought insurance from a non-insurance brand, or would be interested in doing so. While price was mentioned most often, other reasons included brand loyalty and convenience. Trust was another important factor. 62% of respondents were interested in buying financial products from a trusted brand, rather than a bank. For millennials, the number went up to 95%. First movers might have an advantage here as well. 20% of our respondents had never been offered financial products from a retail brand - but they liked the idea. All this is promising news for companies outside the traditional insurance sphere who are looking to build revenue and customer loyalty with embedded insurance. If you can deliver the product and experience consumers are looking for, the appetite is there. It’s hardly a secret that convenience is crucial to customer experience in the digital age, so it comes as no surprise that it was important to our respondents. 59% told us that they’d be more likely to buy insurance if it were offered digitally, as part of a related transaction. Younger consumers were more likely to be enthusiastic about digital insurance: nearly 70% of respondents aged 18-29 were interested in buying insurance directly through a transaction on a retail website. For half of our respondents, embedded insurance wasn’t a novel idea. 50% had already bought embedded insurance at least once, at the point of sale in a related transaction. For many consumers, insurance is a long-term purchase. 68% of our survey respondents told us they’d had the same insurance provider for at least two years, and 10% had had the same provider for more than five years. For retailers, insurance could also be an overall boost to retention. 62% of respondents said that when a retailer offered protect-your-purchase options, they were more likely to be repeat customers. Learn more about offering embedded insurance in our free guide, or contact us to get started.

How to Market & Sell Pet Insurance

Mar 11, 2022

Offering embedded pet insurance is a great way for companies that already serve pet owners to bring in an ongoing source of revenue. But just like every other product out there, marketing and advertising are key contributors to your overall sales. If you’re new to the industry, here are six pet insurance marketing tips to keep in mind when selling pet insurance. Because pet insurance is still relatively new in the US, some of your customers may not even be aware that it’s an option. So how do you convert them? From industry experience, we know that customers are most likely to sign up for insurance when it’s offered as a complement to their existing pet purchase. If you can make them this offer at the point of sale as an add-on to what they’re already buying, you are much more likely to win that additional revenue (and turn a one-time customer into an ongoing one). Your existing relationship with your customers can help you make the right insurance offer at the right time. From their purchase records, you probably already know what kind of pet(s) your customer has, and how much they tend to spend on pet expenses. Leverage that data in your pet insurance marketing strategy. A customer who regularly buys vitamins and specialty food for their pet might be interested in a wellness package. A customer with several pets might be interested in a multi-pet discount offer. Additionally, you likely have a database of prospects that you’ve identified as your target audience, but who haven’t purchased with you yet. Since you’re already actively marketing to this group, you can add your pet insurance offer into the mix and the additional value may help nudge them over the conversion line. Insurance is complicated, and sometimes consumers miss out on the coverages they need because the details are confusing or buried in legalese. As a trusted source for information about their pet, your brand is in a great position to break it down for them. In your pet insurance marketing, offer detailed explanations of how your pet insurance works, and what is or isn’t included, in clear, natural language that your customers can easily understand. Avoid confusing your customers with jargon or complicated legal statements, and don’t try to hide details in small print. Everything in your pet insurance advertising should be understandable by the average consumer, and any information about what is or is not included needs to be easily visible. One of the most powerful sales tools you can get is a real-life story about how your customer’s pet insurance made a difference for them. Consider reaching out to insurance customers who save on big bills, and see if they’d be willing to share their stories so you can leverage these in your pet insurance marketing. When sharing testimonials for insurance, there are a few things to keep in mind: This sounds like a marketing no-brainer, but this is particularly important for insurance advertising. If a state insurance commissioner finds your ads to be misleading or deceptive, you could be hit with fines and other enforcement actions, so it is always advised to be transparent when selling white-label pet insurance. If you use any statistics in your insurance ads, you’ll need to cite where that information came from. It pays to go the extra mile for good, credible sources - a great statistic isn’t so great if you have to attribute it to “koolstats4u.biz” in your ad. It’s a good idea to make sure that nothing related to insurance goes live without first passing a compliance review. If you use external marketing agencies for things like paid search ads, set up a review process to ensure that all insurance-related copy is vetted by your team before going live, including for A/B tests and similar experiments. If your company offers pet-related products or services, selling pet insurance is a great option and it is so easy to do with Boost. If you’re just getting started with pet health insurance, our team is here to help. Get in touch with us today.