Fintech is Booming: Can Insurance Coverage Keep Up?

The fintech industry has redefined how the world manages money. Once confined to physical bank branches and paper trails, financial services have moved online, offering unprecedented speed and convenience. But as fintech companies push the boundaries of innovation, the insurance industry often struggles to keep up, leaving gaps in coverage for a sector that is both technologically complex and financially intricate.

For agents and brokers, the challenge lies in finding the right coverage for clients whose risks span both the tech and financial services worlds. Understanding the nuances of fintech businesses is essential for crafting solutions that protect their unique exposures.

The Rise of Fintech: A Story of Rapid Transformation

Twenty years ago, depositing a check or applying for a loan required a trip to the bank. Today, these tasks are completed with a few taps on a smartphone. The fintech revolution, propelled by companies like PayPal, Square, and Robinhood, has transformed how consumers and businesses manage their finances.

Between 2015 and 2020, venture capital funding for fintech companies nearly doubled, jumping from $19.4 billion to $33.3 billion. By 2030, fintech revenue is projected to skyrocket to $1.5 trillion, with banking fintech alone accounting for 25% of all banking industry valuations.

Yet, for all this innovation, the insurance industry has lagged behind. While carriers have long offered separate coverage options for technology and financial services, few have combined these into comprehensive policies tailored to fintech’s unique needs.

Coverage Gaps in a Complex Industry

Fintech companies operate at the crossroads of two high-risk industries: technology and financial services. This intersection creates exposures that are difficult to insure with traditional policies. For example:

• Tech Liability vs. Financial E&O: Many fintech companies carry errors and omissions (E&O) insurance to protect against claims arising from financial advice or services. However, they may overlook technology errors and omissions or cyber liability coverage, leaving them vulnerable to risks like software glitches or data breaches.
• Fragmented Policies: Even when fintech businesses carry both types of coverage, these are often issued by different carriers, creating confusion during claims. Determining whether a claim falls under tech liability or financial E&O can delay resolution—or worse, leave gaps in coverage.
• Actuarial Uncertainty: The lack of reliable claims data for fintech companies poses another challenge. Without a robust understanding of risk profiles, many insurers shy away from offering comprehensive policies, leaving fintech businesses with limited options.

This fragmented approach to insuring fintech companies creates a complex landscape that agents must navigate carefully to avoid leaving their clients exposed.

Best Practices for Agents Serving Fintech Clients

The key to insuring fintech companies is understanding their business model. Not all fintech companies are created equal; some lean heavily toward financial services, while others primarily function as tech providers.

Here’s how agents can bridge the gap between fintech innovation and insurance coverage:

1. Understand the Client’s Operations:
   Begin with a detailed assessment of what the client does. For example, does a fintech company develop software for banks, or does it offer direct financial services to consumers? Understanding the client’s core operations and revenue model is essential to pinpointing their exposures.
2. Identify Key Risks:
   Tech-focused fintech companies face risks such as software malfunctions, cyberattacks, and intellectual property disputes. Financial services-centric firms are more likely to encounter regulatory violations, fraud, and fiduciary liability claims. Agents must evaluate which risks are most relevant to the client’s business.
3. Work with Specialized Brokers:
   Partnering with a wholesale broker who understands the fintech landscape can help retail agents access the right markets and coverage. These brokers have the expertise to identify carriers willing to tailor policies to meet the client’s specific needs.
4. Consider Combined Policies:
   Whenever possible, look for carriers that offer integrated policies covering both technology and financial services risks. This simplifies claims handling and reduces the likelihood of gaps in coverage.
5. Educate Clients on Their Coverage Needs:
   Many fintech businesses are unaware of the full extent of their exposures. Agents should proactively explain the benefits of comprehensive coverage, including E&O, cyber liability, directors and officers (D&O) insurance, and other relevant policies.

A Market Poised for Growth

Despite its challenges, the insurance market for fintech companies is evolving. As more claims data becomes available, carriers are likely to develop more accurate pricing models and innovative products tailored to the sector’s needs. In the meantime, agents who understand fintech’s unique risks and can navigate this complex market will be invaluable to their clients.

Digital payment solutions—a cornerstone of the fintech industry—already account for 25% of the market and continue to grow. Similarly, investment in insurtech, a fintech-adjacent sector focused on insurance innovation, is on the rise. These trends signal a bright future for agents and brokers who are willing to adapt and embrace fintech as an opportunity rather than a challenge.

Why DOXA?

At DOXA, we understand the importance of aligning insurance coverage with the realities of a rapidly changing market. Our specialized expertise and extensive network of markets and underwriters empower agents to find the right solutions for fintech clients. Whether it’s navigating complex liability needs or securing seamless, combined policies, DOXA partners with retail agents to deliver unparalleled results.

A Trusted Partner for Fintech Coverage

• Industry Expertise: Our deep understanding of fintech enables us to guide agents through the unique risks their clients face.
• Market Access: With connections to top carriers and niche markets, we help agents secure tailored coverage solutions.
• Ongoing Support: From policy placement to claims resolution, DOXA provides agents with the resources they need to succeed.

The Bottom Line

The fintech industry is booming, and its growth shows no signs of slowing down. However, with rapid innovation comes equally complex risks. While the insurance market has been slow to adapt, agents and brokers who understand the nuances of fintech can still deliver exceptional value to their clients.

By asking the right questions, working with experienced brokers, and seeking innovative solutions, agents can bridge the gap between fintech’s needs and the insurance industry’s offerings.

At DOXA, we’re here to help you navigate this evolving landscape. Let’s connect and discuss how we can empower you to deliver the best results for your fintech clients.

Let’s write the future of fintech coverage together. Reach out to DOXA today.