Startup Insurance Hong Kong ,startup business insurance, small business in hong kong

Daily, people are creating new companies in the hope of success. These companies aim to change the world with innovative ideas and unique working styles. These companies are well-known as startups. A startup is a new company that has developed a unique business idea, aims to impact immediately, and takes over the market. In a city like Hong Kong, the number of new startups has increased by 68% since 2017.

Asia is one of the most common places where founders develop their startups due to the diverse target market and economic success. Statistics show China and India hold second and third place in the highest number of unicorn companies, with 25% and 5%, respectively (the US at first with 50%). A Unicorn company is a startup valued at USD 1 billion or more. A startup that turns into a unicorn company is rare, as only 600 unicorn companies are worldwide. However, it is the golden dream for any startup owner.

Being a startup founder comes with great perks and fatal risks. Threats can be cyber risks, lawsuits, employee injuries and more. As a result, there is a rise in startups opting for startup insurance as soon as they begin their business adventure.

Startup insurance is essential to new companies to protect their business, employees, and data from various risks.

What is Startup Insurance?

Startup insurance solution consists of a range of insurances that will protect the company from risks that could damage the company and their brand. It is an insurance solution that allows startup companies to focus on impacting the market rather than worrying about risks out of their control.

The main insurances include cyber, employee compensation, director & officer liability and professional indemnity. However, insurers may also customise solutions to add more policies, that would perfectly fit the specific industry risk.

What Is Covered In a Startup Insurance Solution?

 Cyber Insurance

Most to almost all startups begin on computers. Technology makes researching and creating new companies easier, but the internet poses cyber risks like hackers, phishing, and malware. These risks can destroy a company’s data, brand reputation, and customer relationships, especially for technology startups dealing with sensitive client data.

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For example, in 2019, a well-known company- Alibaba, was hacked. The hackers stole customer data using the crawler software they created, including usernames and mobile numbers. The cyber-crime had an enormous impact on the successful company, losing millions of customers and a significant financial loss due to the damaged brand image. Thus, even a big company like Alibaba can be a victim of cybercrime and suffer devastating outcomes.

The increase in cybercrime is why cyber insurance is vital to startup insurance. Cyber insurance can limit cyber threats and provide valuable advice when a company is affected by cybercrime. This main factor of startup insurance will help the company cover legal fees, notify customers about a data breach, and assist in recovering compromised data. In addition, startup insurance can help a company recover from financial loss and reputation damage. Therefore, insurance will protect startups from cybercrime, which could happen at any time.

Director and Officer (D&O) Insurance

As a startup grows, directors and managers are essential for its success and brand development. However, with growth comes increased responsibility, regulations, and potential risks. Failure to comply with regulations and duties could result in lawsuits.

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For example, the Theranos Scandal involved a startup company claiming to have created a compact blood testing kit. After a year, it was revealed that the technology was inaccurate, leading to lawsuits and financial losses for the company’s directors and officers.

Claims like these are why director and officer (D&O) insurance is crucial for startup insurance. It can help the director or officer by providing legal costs to defend themself. The cover will pay for defence proceedings and compensations related to the claim. In addition, with the help of D&O, startup insurance will cover an extensive range of personal liability for any director and officer on duty.

Professional Indemnity (PI) Insurance

 Many Startups globally provide advice and services to clients in exchange for payment. When providing a service, there is always a chance of errors. Professional errors can lead to lawsuits that may cost a company millions and even financially ruin small startups.

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For example, in August 2019, Apple sued another company called Corellium for creating iOS-operated software whose main function was to run unauthorised copies of the IOS system on non-Apple devices. Such cases are considered copyright infringement claims and can be very costly to defend against, as the founder will have to pay for lawyer fees and any compensation costs.

Professional Indemnity (PI) is a perfect fit for startup insurance companies with professionals involved in these situations. Professional indemnity insurance will provide the company with the cover the cost of the claim and settlements. Therefore, the involvement of PI insurance in the startup insurance solution will protect the business and avoid damaging financial loss.

Employee Compensation Insurance

Employees are crucial to developing and converting a startup into a successful business. According to the law, the employer is liable for any injuries and costs related to the employee’s injury at work. Employers are responsible for covering costs related to work-related injuries, including medical bills, 80% of the employee’s salary during recovery, and compensation.

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For example, an injury may occur when an employee slips in the office, resulting in a broken arm and leg. The doctor may advise around two months of recovery, and the employer must pay him during his break till he returns. At the same time, a new temporary employee should be hired to cover the injured employee’s work.

In many cities like Hong Kong, it is part of the law to have employee compensation insurance to hire an employee, and the government fines any company that doesn’t follow. Therefore, employee compensation insurance is a mandatory factor in startup insurance.

Benefits of Having Startup Insurance

The startup insurance solution has a range of insurance that will cover almost all risks that may affect a startup business. Therefore, a new company needs to meet with insurers to discuss the best startup insurance that fits the business model.

  1. One of the best benefits is that insurance helps cover any financial loss due to any risks mentioned above. Especially for new companies, money is always tight, and as a startup, a founder would instead invest funds into the business rather than claims.
  2. Another reason to have startup insurance is to gain the client’s trust. Clients must know that their data is safe from cyber risks, and insurance will help them recover if anything goes wrong. As a result, a client is more likely to take advice or buy products from a secure and protected startup.
  3. Lastly, startup insurance gives the company more confidence to grow. The founders and employees do not need to worry about things that may not be in their control and focus on developing the future of the business. It motivates employees to know if they happen to make an error or even get injured at work. The company founder(s) have insurance to cover them.

 Startup insurance protects the company from risks and turns the founder’s dream into reality.

 

To learn more about startup insurance in Hong Kong or Asia and protect your startup from a range of risks, contact Red Asia Insurance.