Conduct due diligence on the insurance carrier:

Before entering into an agreement with an insurance carrier, a start-up should perform a due diligence review of the insurance carrier. During this review, the start-up should consider inquiring into:

  • Territorial and Lines of Business Scope: Inquire regarding the states in the United States in which the insurance carrier is licensed and the lines of business that the insurance carrier is authorized to write under each of its licenses.
  • Experience with Particular Insurance Products: Inquire into the insurance carrier’s experience with insurance products that are similar to the one with which the start-up would like to be involved.
  • Services: Inquire into the services that the insurance carrier can provide and any corresponding costs/fees.
  • Documentation: Request a copy, if available, of the insurance carrier’s template/proposed agreement.
  • Reinsurance: Inquire into the insurance carrier’s reinsurance capability.
Key Agreement Terms:

An agreement with an insurance carrier should address, if and to the extent applicable, terms such as:

  • Scope of appointment/authority.
  • Scope of services provided.
  • Commission/fee structure and pricing.
  • Insurance that must be carried by the start-up (e.g., errors and omissions insurance).
  • Reporting and recordkeeping requirements.
  • Handling of funds (e.g., premium funds, claims account).
  • Handling of confidential information.
  • Data privacy and data security.
  • Intellectual property.
  • Indemnification.
  • Dispute resolution.
  • Term and termination.