Why Tech Startups Need an Insurance Broker, Not Off the Shelf Cover

If your business doesn't fit the form, that's normal

Picture a Seed Stage AI diagnostics company. 5-10 people, growing fast. A model that reads medical scans better than experienced registrars.

An NHS trust wants to run a pilot. Brilliant news, except the contract arrives with a schedule of insurance requirements: specific cover, specific limits, specific wording, signed proof within 30 days. This scenario is not uncommon.

So the founder does the obvious thing. Opens a comparison site and finds a professional indemnity policy. Unfortunately, this is not uncommon either.

When the Founder digs into the wording, they realise none of it fits. The policy assumes a consultancy that gives advice, not a model that generates diagnostic outputs. The public sector exposure isn't covered. The limits are wrong. The deal is real but the cover probably isn’t enough for real life. That’s because off the shelf insurance products have no tick-box for what the business actually does.

This example might sound like a rare edge case, but it’s a common experience for anyone building something proprietary.

The companies you admire had the same problem

Early PayPal was moving money between strangers on the internet at a time when there was no category for it, and no underwriter with a comparable risk to price against. Early Airbnb was asking people to let strangers sleep in their homes, then asking insurers whether that was a thing anyone could cover.

Early Uber sat on an unanswered question; are drivers employees, contractors, or something else entirely, and most of the liability depended on the answer.

Frontier AI labs are a more recent example. What does professional indemnity even mean when your product is a model that produces outputs you cannot fully predict in advance? Anthropic, OpenAI and the rest were, at some point, companies doing something no policy template had anticipated.

(For clarity, we don't insure ChatGPT. We wish. Give us a call, Sam.)

Every one of these businesses was, early on, uninsurable by the standard insurance playbook. Not because the risk was unmanageable, but because the standard playbook was built for businesses that already exist in volume, and data at volume is how insurers calculate risk.

Why off the shelf fails the businesses that matter most

Off the shelf insurance is priced and worded around companies an underwriter has seen a thousand times before. That works fine for a plumber or a marketing agency. It breaks down the moment you're doing something with no comparable.

We see two things go wrong, most commonly. The first is pricing. With no reference point, a standard product either declines you or loads the premium to cover its own uncertainty, so you pay over the odds for cover that still doesn't match your real-life risk.

The second is worse, and you don't find out until it matters. A policy written for a business that you're not can leave a gap in cover. You might even discover it at claim time, which is the most expensive moment to discover anything, really.

When a premium sounds expensive, just consider the potential cost of a gap in insurance.

Your risk changes faster than the policy

There's a second problem that off the shelf products handle badly, and it's specific to startups. Your risk profile does not sit still.

The company you are at pre-seed is not the company you are at Series A, and neither resembles the company you'll be at Series B. A static annual policy, bought once and renewed on autopilot, falls out of step with the business within months.

Cover that grows with you isn't a nice to have for a scaling tech business. It's the whole job.

What a broker does that an online-only insurer cannot

A comparison site or an online-only insurer matches you to existing products. If you fit one, great. If you don't (more likely), it has nothing useful to say.

A good broker does the thing the form can't. We translate what your business actually does into terms an underwriter can understand and price. We know which insurers will engage with novel risk and which will decline on sight, so you're not wasting weeks finding out the hard way. We argue your case, structure the wording around your real activities rather than a generic template, and revisit cover as the business changes rather than once a year out of habit.

That is skilled work, and it is the difference between a policy that looks fine on paper and one that actually responds when you need it.

REALLY HONEST’s Director of Insurance Operations commented;

When it comes to tech start ups, finding a broker that's an expert in your industry is critical. Insurers are quick to focus on the negatives and worry about what can go wrong. They're trained to; this is part of the role of an underwriter, to weed out the nicest, cleanest businesses and avoid the ones that seem risky. If you're doing something innovative, or you have an early stage business that has limited track record, insurers are going to immediately find concern before they find comfort. This results in higher premiums, lower scopes of cover, and much more restricted access to market.

Finding the right broker means finding a partner that truly understands your business, however unique it is, and the exposures that come with it. A broker that can explain the business properly to an insurer, draw similarities to other businesses they've worked with and explain to the underwriter why the business isn't as risky as the insurer thinks they are. A good broker doesn't just get insurers to a place where they're comfortable to provide a quote, they get insurers to a point where they're fans of your business and they want to see it succeed.

That's how you get the most out of a policy, the best cover and the most competitive price. That broker also knows your requirements better than most; they can explain every inch of the coverage to you in a way that's easy to understand and help you get the most out of the policy, least of all when it's time to make a claim.

At REALLY HONEST, we have a combined 50+ years of working with high growth tech companies, in every field from software and AI, through to digital health and biotech..

If your business doesn't fit the form, that's normal. That's the conversation we're built for. Talk to us.