Embroker Insurance Index
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Risk Reactivity: Directors & Officers Insurance
This chart shows the shopping patterns of startups for Directors & Officers insurance beginning in October of 2022. The data reveals the importance of founders to protect their investors and leadership from potential litigation, errors, and fiduciary concerns.
Risk Reactivity: Tech Errors & Omissions Insurance
This chart shows the shopping patterns of startups for Technology Errors & Omissions insurance beginning in October 2023. The shopping data reveals whether or not founders are concerned or confident in their technology, and in their staff’s ability to employ that technology.
Risk Reactivity: Employment Practices Liability Insurance
This chart shows the shopping patterns of startups for Employment Practice Liability insurance beginning in October of 2022. The data reveals the interest in founders’ to protect themselves from potential litigation and claims made by current and former employees.
Risk Reactivity: Q4 2023 Outlook
Directors & Officers: $5M Limits Up 205%
Technology Errors & Omissions: $2M Limits Up 106%
Employment Practices Liability: $1M Limits Up 60%
October has been quite a popular month for insurance shopping and quoting. Our data shows major increases in most limits of each of our core three startup policies, showcasing the seasonality of work that goes into preparing for the holidays. There were a few major highlights in all three core policies, however, that soared beyond the high tide that seems to have lifted most coverages.
- The “SEC effect” seems to be continuing into Q4. We are continuing to see increases in $5M limits for Directors & Officers policies, to the tune of a 205% increase between September and October. We are seeing a corresponding rise in cyber policies which, tied to the new SEC rule around executive liability for cyber attacks on publicly traded companies, merits the increase in higher limit policies. However, in contrast, technology errors & omissions and cyber liability policies saw an increase, but for lower limits.
- $2M limit policies were the star of the show to kick off Q4. While each of our limit options increased, we saw the largest in $2M policies, jumping up 106% from September. Unsurprising, especially as October officially marks the start of Cybersecurity Awareness Month. However, the focus on $2M policies, rather than lower limits of coverage, is interesting. Some increased concern may be attributed to our newly released 2023 Cyber Risk Index Report and seasonal interest in this particular policy. However, it will be interesting to see how this trend evolves moving into the holiday season.
- While there was some movement around the lower policy limits for EPLI policies, things remained fairly status quo, echoing what we saw in September. As layoff headlines make way for geopolitical concerns and cybercrime news, we may be seeing the public consciousness moving away from work-related concerns as the year comes to a close. We will monitor this activity as we continue into Q4, as organizations solidify planning and resource allocation for 2024.
Takeaway: October saw a major rebound on all policy types in response to a September dip. A strong start to Q4 for insurance shopping and may indicate some preparations going into end-of-year and the holiday season. While the biggest increases came for Directors & Officers and Tech E&O, these may be partially chalked up to seasonality and cyber awareness month. As we move into November and begin to see 2024 on the horizon, we expect to see a continued upward trend in shopping across policy types as businesses review their existing policies and prepare for the year ahead.
Risk Reactivity: Q3 2023 Outlook
Directors & Officers: $5M Limits Back to Single Digit Growth
Technology Errors & Omissions: 400% Increase in $4M Limit Policies
Employment Practices Liability: $3M Limits Continue Upward Trend
This summer brought with it an unseasonably high shopping rate across all policies. Summertime is generally the slow season for insurance, but new federal rules and global events spurred a spike in businesses shopping around. However, it seems that we are coming back to Earth as the fall season arrives. While the top-line limits for D&O policies dipped, we are still seeing increased interest in people-related policies, matching the trend we have followed all quarter long.
- While 400% increases look like a lot, we can attribute part of this jump to a reduction in $5M policies, as businesses opted to shop for lower limits in the final month of the quarter. While cyber attacks made headlines this month (notably Clorox, and MGM in Las Vegas), and “success disasters” and technology failures are hitting some of the world’s largest service providers, September was still revealed to be an easing month for insurance shopping. While a relaxing way to send off the summer, it does beg questions of preparedness for the way-too-fast-approaching holiday season.
- In August, Directors & Officers insurance saw the biggest jump in $5M limit policies in 2023. Unsurprising, as we predicted a jump in interest for higher limits once the most recent SEC cyber rule was announced. In a month’s time, it seems that companies have found their comfort zone with this new ruling. While high-limit Directors & Officers policies are still being shopped for at a high rate, $5M limit policies have fallen back to earth to the tune of just below 10% of all shopped D&O coverage.
- While Directors & Officers policies took a dip, EPLI’s higher limits have surprisingly jumped in the summer months. As fall begins, we’re seeing a similar trend. $3M limit policies are continuing to surprise, making up over 5% of all shopped policies for two weeks in September. To end another summer of social actions around workers’ strikes and rainbows on beer cans, companies still seem to be acutely aware of potential litigation (and the social inflation that comes with it) for our words and actions.
Takeaway: September is a busy month for everyone. Back to school, racing to close out the quarter, planning for Q4 and the holidays. While our September shopping data seems to have dipped across the board, this seasonal trend is, and was, expected. We enjoyed an unseasonably hot summer for insurance shopping. So, in the last month of the quarter, we remind ourselves that, while we may be in the eye of the storm now, Winter is coming.
Directors & Officers: 14% Increase in Shopped Policies
Technology Errors & Omissions: 20% Increase in $5M Limit Policies
Employment Practices Liability: 44% Increase in Shopped Policies
As Summer wanes, August seems to have brought increased awareness of people-related risk. While more organizations welcome team members back to the office and Summer vacations end, more startups are shopping for employee risk-related policies, and increasing their limits.
- Technology Errors & Omissions policies continued their upward trend in rising limits. Founders shopped for $5M limits to the tune of 20% of all Tech E&O policies. This marks the first time it has broken the 20% barrier in 2023. $3M limit policies also saw a new level of interest, breaking the 20% mark for 3 out of the 4 weeks of August, another feat not seen all year. These numbers indicate an increased concern in staff-related liability. As more employees are welcomed back to the office, we expected that this number may come down. However, this maybe precautionary, as many technology companies have slowed layoffs, but have yet to resume hiring. Reduced staff and increased workloads may contribute to errors & omissions that these organizations simply cannot afford.
- While limit distribution stayed largely the same, the total number of shopped D&O policies increased by 20% from July to August. This follows the increase in shopped overall EPLI policies in the rise in people-related risk. However, the recently released SEC rules on cyber risk definitely have a part to play here. Introduced at the tail-end of July, the SEC now requires companies to disclose risk management, strategy, and governance along with incident reports related to cyber attacks. This includes descriptions of companies’ board of directors’ and management’s role in overseeing cyber risks. As a result, this information could lead to upper management being found at fault for a cyber breach, and potentially being charged. According to multiple outlets, this decision will likely change the landscape of D&O insurance, and has surely contributed to the increase in shopped policies this summer.
- Similar to D&O insurance, limit distribution for EPLI policies showed similar trends in August. However, Employment Practices Insurance saw the largest month-over-month increase in shopped policies, jumping 44% from July to August. As claims and big-profile employment practices cases continue to make headlines, the trend of interest in these policies is not altogether surprising. However, this big of a jump, in the middle of the summer, is a bit interesting. More organizations are asking their staff to come back into the office, at least part time. But, while many say that “full time office work is dead,” businesses are still concerned for the potential consequences of having more people back in the office. While this was a similar takeaway in July, we may see this trend occur for the foreseeable future.
Takeaway: Following July’s lead, August has continued the unseasonable heat in insurance shopping this summer. While we can attribute some of these policies to SEC rules and returning to the office, we can also throw social issues, workers’ rights, and other global affairs into the mix. As we move into the last month of the quarter, we will follow this trend as it either wanes or continues as the ramp up to the holidays season begins.
Directors & Officers: $5M Limits Up to 12% of Shopped D&O Policies
Technology Errors & Omissions: 51% Increase for All Policies to End July
Employment Practices Liability: $1M Limits Up To 79% of Shopped EPL Policies
July surprised us in a few ways, and was predictable in others. While it didn’t meet the boom that June started Summer with, we did see some promise near the end of the month.
- Tech E&O policies with $5M limits have taken a slight dip, with $1-$3M policies being preferred. With more staff back in the office since the start of COVID and the continued comfort with those that work remotely, companies may be less concerned about their staff as liabilities for errors & omissions. However, we have seen a 51% increase in shopped Tech E&O policies compared to June. So, while the coverage may be lower, it seems that more organizations are using the summer months to experiment with Tech E&O coverage.
- D&O policies with $5M limits took a huge leap to 12% of all shopped policies. This is the first time that we have seen double digits for that high of a limit on D&O insurance in 2023. On July 23, the SEC announced a rule that added additional responsibility to executives in the event of a cyber breach. The rule makes organizational leaders much more liable for financial damages that result. As tech founders look to schedule bouts in the boxing ring, Bob Iger letting Hollywood writers bake in the California heat, and all the other strikes and union work around the country, startups may be more sensitive to the risk executives post to their organizations resulting from this rule, as well as the social climate.
- Founders are opting to shop for lower limits ($1M policies). These policies represent 79% of shopped EPL policies in July, up from 63% in June. While this seems small, we may be seeing a continued lack of concern around layoffs & summer break. May be a signal that employment volatility is easing. However, as union strikes and workers’ rights campaigns increase, we may see interest in these policies peak in the next few months.
Policy shopping dipped to begin the month, a predictable reaction after June’s boom. While we predicted a bit of a Summer slowdown, numbers rebounded majorly to close out the month, a surprising turn for what is known to be a down season in the insurance industry. We will continue to monitor search interest as we move into August, and look to close out Q3.
Risk Reactivity: Q2 2023 Outlook
Directors & Officers: 3% Increase for $3M Limits
Technology Errors & Omissions: 5% Increase for $3M and $5M Limits
Employment Practices Liability: Negligible Movement
As we approach the scorching Summer months, June hasn’t slowed the momentum built up from May’s turnaround, at least when it comes to startup insurance. But, nearing the first day of the new season, founders’ attention turned to the sea.
- The first week of June started off with a bang for companies looking for Tech E&O Cyber quotes with a 13% increase over the two previous record setting weeks (incidentally the week SVB collapsed and the week First Republic collapsed).
- June was on par for overall quotes in comparison with May, though there was also an uptick overall in the number of D&O quotes throughout the month (a 20% increase over April, but just a 3% increase over May).
- Higher limits were the name of the game, with D&O shoppers favoring $3M quotes (21% of shoppers picked $3M as compared to 18% in May and just 12% in April), and Tech E&O shoppers picking both $3M and $5M quotes more often than in previous months (20% chose $3M in June as compared to 15% in May, and 16% chose $5M as compared to 12% in May).
- The week of June 18th saw a 12% decrease in overall quotes, as the world waited to find out the fate of the Titan submersible. What’s notable, however, is that the week of June 19th in 2022 saw a 24% drop from the previous week as well. So perhaps people just aren’t thinking about business risks that week, or the first day of Summer is on everyone’s mind.
The momentum built by May’s comeback is ongoing. While Summer generally means an insurance shopping slowdown, 2023 continues to surprise. The influence of yet another catastrophic bank failure can’t be overlooked, however, and the seasonality of the last weeks of this month are an interesting anecdote to keep in mind. Overall, as we move into Q3, we may see these numbers flatten as vacations start and minds are elsewhere.
Directors & Officers: 16% Increase in General Quotes
Technology Errors & Omissions: 7% Increase in General Quotes
Employment Practices Liability: Negligible Movement
Following the flurry of quotes resulting from the SVB collapse in March, May followed April’s settling period with an overall 3% increase in quotes for startup insurance across the board.
- Increases can be seen across several product lines, with a 7% increase in Tech E&O quotes and a 16% increase in D&O quotes being highlights.
- While April saw an increase in founders looking at the top end of coverage for Tech E&O quotes, that interest has moved back to lower limits with 12% of founders shopping for $5M coverage in May versus 17% in April.
- EPLI seems to have settled more than any other policy this month. While it doesn’t tell the entire story, the technology sector has begun to ease its layoff frenzy that began in January 2023 when over 84,000 employees were laid off. May saw nearly 15,000 layoffs, down from 18,000 in April.
Takeaway: While a 3% increase is far from a bounce back, startups are clearly easing up after a shaky March and April when it comes to risk transfer and insurance shopping. Seemingly taking the month of April to cool off, May shows some opening-up in the market, despite the follow-on affects of the SVB collapse, including the closure of First Republic Bank. Meanwhile, as more employees get used to hybrid of back-to-office work and layoffs ease, it seems that companies are settling in for a late Spring of new starts and brighter days for their team members.
Directors & Officers: 89% Increase for $2M Limits
Technology Errors & Omissions: 30% Increase for $5M Limits
Employment Practices Liability: 32% Increase in $2M Limits
Startups seem to have settled in the month of April after the frenzy of March around the collapse of SVB.
- High limits for Tech E&O, Cyber are still preferred with a 30% increase in quotes for the $5M limit. This was a result of drops in both the $1M and $2M limit quotes.
- D&O quotes have also settled since the collapse, with the lower limits being more popular again. There was an 89% increase in $2M quotes from March to April for D&O.
- EPLI quotes remained largely unchanged from March, until a big spike from $1M to $2M policies that worked out to about a 32% increase in $2M limits.
Takeaway: While things seems to have settled for startups, they still appear acutely aware of the risks and are taking steps to transfer those risks via insurance. We can see founders/ short-term memory at play with the decrease in D&O limits, while the sudden limit increases around Tech E&O, Cyber and EPLI speak to concerns around employment practices. The tech industry, among others, have experienced another round of layoffs, highlighted by LinkedIn, near the end of April. This may be on the minds of founders as they head into the Summer months.
Risk Reactivity: Q1 2023 Summary
Directors & Officers Insurance
In this quarter, we saw some interesting moves in this insurance type. Namely as a result of the collapse of Silicon Valley Bank (SVB). The forced closure of SVB on March 5, 2023, had an immediate impact on how founders were shopping for insurance. Searches for $3 million limit D&O quotes more than doubled from 7% on March 5 to 15% only four days later. In the week of March 12, just 10 days after the closure, quote searches skyrocketed 62%. Initially, these searches were for high-coverage amounts, causing the performance of $1 million quotes to decline; D&O quotes dropped by 37%.
Tech Errors & Omissions Insurance
On March 2, The White House released a momentous cybersecurity strategy. This triggered a trend among startups; searches for Tech E&O policies jumped 33% following the announcement. This set the first record in 2023, beaten only by the rush of shoppers after the SVB closure. More shoppers elected for higher rates, however, rather than hedging their bets with the lowest level of coverage. It seems that shoppers sought comfort in liability transfer, leading to a record number of quotes across all policies available through Embroker: EPL, Tech E&O, D&O and Fiduciary.
Employment Practices Liability Insurance
Similar to D&O and Tech E&O, there was some volatility around EPLI as a result of the SVB closure. It seems that founders (and possibly their boards), were concerned with the potential legal ramifications of lost payroll, unpaid vendors, and more. These kinds of financial conditions put businesses at risk of suits that these insurance policies may cover.
Around this time, the number of $1M limit EPLI policies dropped by over 25% immediately following the SVB news, as startups opted for more coverage. However, nearing the end of the quarter, we saw the number of $1M limit policies resurge as frugality seemingly returned: $1M EPLI policies jumped 42% in this time.
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