Venture Capital Insurance and the A Team
I didn’t see the A-Team movie this Summer, but have to admit as a child of the 80’s I was a big fan of the TV show. I remember vividly watching the pilot as a 13 year old after the Redskins beat the Dolphins in Super Bowl XVII. I know BA hates flying, I know the crack commando team went to prison in 1972 for a crime they didn’t commit, and I know that Hannibal (George Peppard, the only Hannibal) is a cigar smoking, master of disguise.
So what does this all have to do with insurance? Probably not alot…but here’s a shot:
We work with many VC’s as part of our role in managing the insurance program for members of the NVCA. And we have found that, like most innovators, Venture Capitalists are so focused on working IN their business that they sometimes don’t spend enough time working ON their business. This is evidenced with our frequent discovery of poorly structured insurance placements for VC’s, on even the simplest of insurance policies. (Clarification – it’s not a policy holder’s fault if their insurance is not up to par….that is their broker’s job. The policyholder is only responsible for choosing the right broker) Take a General Liability (GL) policy for example: every company has one of these babies. It covers your business for claims that you, your employees or products/services caused someone else bodily injury or property damage. But it also covers a wide variety of personal injury issues that could come into play for a VC. Since most insurers (I’m not aware of any) don’t have a specific classification in their policies for a VC firm, they will categorize them as investment advisors or some other similar financial organization. And in doing so they will also receive a myriad of exclusions that are typical for financial organizations….inluding ones that will severly limit their ability to cover personal injury claims. Insurers also worry about picking up vicarious risks stemming from activities of portfolio companies….hence, more exclusions.
Another problem in this scenario is the pricing. Since most insurers shy away from insuring smaller financial organizations (due to perceived high risk trading/transactional risk that could spill over onto a GL policy) they don’t even offer a small business policy. So most VC’s are placed on a policy that is designed, and priced, for larger firms.
Recognizing these issues and shortcomings our crack team at TechAssure set out with NVCA to build a solution for Venture Capital companies. The result, which is exclusively available to it’s members, corrects the coverage problems, removing almost every exclusion, and has reduced the average venture capital firm’s costs by more than 20%. The policy recognizes VC’s as a “small business” as it pertains to risks covered by basic insurance – the way it should be.
Ready for the tie-in?? As Hannibal Smith said best- I love it when a plan comes together.