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Benchmarking: The Insurance Shortcut That Failed Client

  • steve901879
  • Mar 4
  • 1 min read

Updated: May 7

Benchmarking is everywhere in corporate insurance, but does it actually help clients? Too often, benchmarking is used as a shortcut- showing what other companies buy rather than what a business actually needs. The reality is that risk isn’t one-size-fits-all. True risk assessment requires more than just averages; it demands a deep understanding of industry-specific exposures, financial impact, and litigation trends. At URM, we’re using AI-driven insights to move beyond benchmarking and deliver precision in risk recommendations.






What is Benchmarking? Common Metrics for Benchmarking Industry Company Size Revenue (E&O and D&O) Assets or Capital Raised (D&O) # of Employees (EPL) Example: If Fintech and $15M Capital Raised, then $2M of D&O should be purchased. A metric used by brokers to form a recommendation of coverage limits.

Social Proof (pluralistic ignorance) - The assumption that competitors probably know more about this than I do. Illusion of Objectivity - The assumption that benchmarking is fact-based simply because it uses numbers. But these numbers are often outdated, misleading, or too generalized to be useful. Easy for brokers to use, and simple for clients to understand - No need to consider unique risks when you can just pull a number from a report. Why Benchmarking Fails (and Works) Benchmarking is about perception, not precision.



If yes, current benchmarking may be perfect for you. But if your business is more than just a funding round and a label, shouldn’t your benchmarking reflect that? Your company is not a category Your risk is not capital raised Real risk analysis looks deeper Do you describe your business as “Fintech with $15M Raised?” Elevator Speech



D&O Example Risk Analysis Class Action (CA) Risk Lots of customers, small individual value How many Class Actions actually happened to companies with these GRFs? Zero in last 3 years Regulatory Risk Very heavily regulated History of litigation from CFPB, FTC, SEC Six relevant Regulatory Enforcement actions located Two relevant to these GRFs Hourly rate of of Reg. Atty = $850 - $2,250/hr Average time to resolution 17 Months Est. cost to resolve (excluding settlement) $900K - $2.25M Severity of Litigation very high compared to fintech with these GRFs. 3. Drivers of Risk Severity Company ability to indemnify - Low, $15M capital raised Effects if Regulatory or Class Action Litigation - Extreme Ability to raise Series B Acquisition attractiveness over 18 month lawsuit 4. Risk Tolerance (Typically a Discussion) 2. Company Specific Drivers of Risk (Frequency) 1. General Risk Factors (GRF): Company Industry / Subindustry - Fintech --> LenderTech --> D2C Size - $15M Series A, $900K Revenue, Last Raise 9-months ago Understanding Risk > Understanding Peer Benchmarking

The cost of resolving a class action or regulatory claim could easily erode $1M or $2.5M of coverage If this happens, the company will be left paying attorneys and your choice of counsel is $1,100/hour. There will be very little settlement value from insurance if you do not purchase at least $5M of coverage A regulatory action that impacts the company will also impact the Series B round of funding If you cannot raise a Series B in 9 months, then the company will likely be dissolved The additional cost is low compared to its value (we can quantify this) D&O Recommendation Risk Analysis Cost of Coverage We recommend $5M - $10M of D&O with full regulatory coverage, and Choice of Counsel language. Reasoning: Now that we understand the risk (through actual data and the client-specific risk tolerance), we can get to the functionality of pricing recommend limits. Understanding Risk > Understanding Peer Benchmarking $1M - $45,000 $2.5M - $65,000 $5M - $85,000 $10M - $125,000 The cost of resolving a class action or regulatory claim could easily erode $1M or $2.5M of coverage If this happens, the company will be left paying attorneys and your choice of counsel is $1,100/hour. There will be very little settlement value from insurance if you do not purchase at least $5M of coverage A regulatory action that impacts the company will also impact the Series B round of funding If you cannot raise a Series B in 9 months, then the company will likely be dissolved The additional cost is low compared to its value (we can quantify this) We recommend $5M - $10M of D&O with full regulatory coverage, and Choice of Counsel language. Reasoning: The cost of resolving a class action or regulatory claim could easily erode $1M or $2.5M of coverage If this happens, the company will be left paying attorneys and your choice of counsel is $1,100/hour. There will be very little settlement value from insurance if you do not purchase at least $5M of coverage A regulatory action that impacts the company will also impact the Series B round of funding If you cannot raise a Series B in 9 months, then the company will likely be dissolved The additional cost is low compared to its value (we can quantify this)

These types of thought exercises are no longer reserved for Fortune 500 companies with risk management departments. All companies deserve to work with a broker that cares enough not to tell them what other companies buy, but what they specifically need. URM helped build Undr AI, and customized an AI model for our clients. We use these tools in conjunction with expertise to deliver the results and services clients need and want.

 
 
 

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