Launching in the US: Insurance
Getting the correct insurance to cover the combined UK and US entities is important. There are some nuances in how insurance works compared to the UK and these should be understood ahead of launching in the US. Typically, insurance issues can be difficult to remedy once they have occurred and this is one area where the devil is in the detail.
The UK has one of the most established insurance markets in the world with Lloyds of London arguably being at the heart of the global insurance market. It can be very hard to source a policy in the US that will apply to foreign entities so British companies should take advantage of that London acts as a global hub for the insurance market and as such has well-trodden paths for helping UK companies find a policy that will cover all foreign subsidiaries.
Health insurance is very different in the US given the lack of a nationalised health service. As a result, it is imperative that you understand the insurance position for any short-term or long term employees. It is a standard term in virtually all benefits packages and will typically be administered by a PEO or benefits provider. Additional information on this can be found in our previous blogs on PEOs and Healthcare.
There are also some specific US insurance nuances such as “Joint Names Clauses” and “Additional Named Insured” where a client may look for you to indemnify them for any loss as a result of your product or service and for them to be named on your insurance policy. Terms like this can be fairly common in some industries but if you are working with an insurer who is not familiar with US commercial practices this may be difficult.
Key things when thinking about insurance?
The main consideration is ensuring that you fully understand what is and isn’t covered under your existing policies. In order to avoid any gaps between policies, having a single over-arching policy across multiple territories may provide the most robust approach. Be aware that any ambiguities around international policies could be exactly what an insurer is looking for to invalidate a claim.
What should you put in place?
• You should check to see if the Directors and Officer’s insurance policy (“D&O”) will need extending in scope as it may only cover the UK. There have been some instances of US Courts making rulings against Directors of a company in order to ensure sufficient damages are paid to a plaintiff;
• If you have employees working in the US for extended periods of time, it may be that this falls outside of your existing Employers Liability insurance, and there may be a requirement to take out an Workers Compensation policy which is required under State law;
• If you have employees operating in the US on a short-term or secondment basis, your companies’ travel insurance may not cover them for an extended period of travel. As a result it is advisable to check this in advance. Monthly insurance plans for foreign travellers such as IMG Global are intended to replicate the level of health cover that a full-time employee may receive as part of an employment package;
• It can be worth reviewing your terms and conditions that you will give to US clients in order to make sure this matches with the level of cover you are comfortable giving. In many instances, restricting the level of “consequential loss” is also advisable. Consequential loss often includes direct and indirect damages that occurs as a result of an event;
• If you are thinking about launching in the US in the next 12-18 months, it is worth considering that you may need to change insurers in the near future so do not agree to any long term arrangements with your underwriter;
• Whenever there are any material changes in the business such as a change of address or alteration of business activity, you are required to update your insurer or broker as this may otherwise invalidate your protection; and
• From talking to specialists, having a group policy which covers all the international entities is far more robust than having multiple different policies covering specific geographies. There is a risk that otherwise, a claim that may arise which falls between policies.
Where to go next
• Check out our Dropbox for a range of additional resources;
• For advice on how to navigate insurance related issues, specialists such as Elaine Lamb at La Playa insurance can help; and
• For questions around health insurance, professionals such as Stuart Bagshaw at BABLeap are worth speaking to.
Thanks to Elaine Lamb from La Playa insurance, who has worked with some of our portfolio companies to put in place the insurance they need when internationalising, and for her help in writing this article.
This blog and those in this series are aimed at helping entrepreneurs learn about the US market, what it takes to start here, and ultimately what it takes to succeed here. Many of the topics (if not all) are complex and it is best to view these blogs as a basic introduction from which you the entrepreneur must triangulate to your own specific set of circumstances – and invariably it will be sensible and appropriate to seek third party professional advice.