Insurance premiums for technology companies have seen a surprising trend in 2024, according to a recent report from Embroker, a business insurance platform. The report indicates that a softer market has kept premiums steady or even reduced in some areas, making it a more favorable year for tech businesses.
Specifically, average premiums for errors & omissions and cyber insurance fell by 4% from 2023 to 2024. This is a notable shift from the previous year, which saw a 12% increase in premiums. Meanwhile, premiums for directors and officers insurance remained largely unchanged, increasing by less than 1% for the second consecutive year.
However, not all areas experienced the same trends. Employee practices liability insurance (EPLI) saw the most significant increase, with premiums rising by 11%. This aligns closely with the 10% increase seen from 2022 to 2023.
The report attributes the overall decrease in premiums to increased competition among insurers and a strong reinsurance market, which has allowed tech companies to secure more affordable coverage. Despite this positive news, Embroker warns that these lower costs come with potential downsides. Many large insurance carriers are introducing new exclusions and limitations in their policies, which could leave businesses exposed to risks.
Andy Lea, the chief insurance officer at Embroker, highlighted that while the current market seems favorable, it does not necessarily mean that risks have decreased for tech companies. He pointed out that tech businesses are becoming more informed and filing fewer claims, which has contributed to the lower premiums. However, with the rise of cyber threats and changing regulations, the market could tighten again in the near future.
The analysis covered data from a range of tech companies, from early-stage startups to those with significant funding and revenue. Some businesses are taking advantage of the softer market by expanding their coverage, particularly in errors & omissions and directors & officers insurance. Others are being more cautious, adjusting their insurance budgets to strengthen key protections while cutting back in areas deemed lower risk.
Interestingly, companies that saw their funding increase from between $5 million and $25 million to over $25 million experienced the largest jumps in premiums. Errors & omissions and cyber premiums surged by 108%, while directors and officers premiums rose by 116%. Additionally, EPLI premiums increased by 106% for companies that grew their employee count significantly.
As the tech landscape continues to evolve, businesses are keeping a close eye on their insurance needs and market trends, ensuring they remain protected against emerging risks.