Reimagining Risk: Why Insurance is the Unsung Hero of Digital Platform Growth

In the fast-paced world of digital platforms and the sharing economy, founders and executives are often focused on innovation, customer acquisition, and rapid scaling. However, one critical area often remains a blind spot: commercial insurance and policy design.

In a recent episode of the Bulletproof Your Marketplace podcast, host Jeremy Gottschalk, CEO of Marketplace Risk, was joined by Garrett Johnson, SVP at Marsh, to dissect this opaque yet vital topic. Johnson, with 26 years in commercial insurance and specific experience working with giants like Uber, Lyft, and DoorDash, explained why understanding insurance is not just about protection, but about enabling growth and building user trust.

1. Insurance is More Than Just Risk Transfer: It’s Compliance and Trust

Johnson emphasized that for modern digital platforms, insurance serves two critical roles beyond simply protecting company assets:

The Compliance and Contracts Lever

As a business scales, its insurance requirements become "larger, more complicated, and more expensive." Johnson notes that for founders, insurance is often overlooked but acts as a gatekeeper for professional relationships.

It's often underlooked... you will not get certain contracts with larger players as you scale unless you have certain insurance requirements in play.”

The Trust and Customer Experience Lever

Insurance policies can be structured to directly enhance user trust and act as a competitive advantage. The best-known example is Airbnb’s Host Guarantee:

“Airbnb's host guarantee product... is essentially a million-dollar property damage coverage for you if the renter kind of trashes your home... I'm probably going to feel a little safer going with Airbnb than maybe a competitor of theirs that does not have that type of guarantee product.”

2. Navigating the "Move Fast and Break Things" Paradox

The early ethos of many disruptive platforms often clashed with the regulatory environment, creating what Johnson calls a "bad taste" among regulators.

While disruption is necessary for innovation, a deliberate and thoughtful approach to safety is essential to manage legal and regulatory risks.

"Move fast and break things works great for disruption. It's not really well received at the regulatory level... They often want to see deliberate, thoughtful, careful approaches, which doesn't always marry well with companies that want to disrupt kind of legacy industries."

Founders must have an awareness of this conflict: pushing too hard on growth without robust safety frameworks will inevitably lead to costly pushback on the regulatory front.

3. The Crucial Role of a Specialized Broker

Both Gottschalk and Johnson stressed that using a general "neighborhood insurance broker" is a common and costly mistake for digital platforms.

Why Specialization Matters

A specialized broker understands the unique business model and the legal posture that differentiates a marketplace (as a connector) from the service providers themselves.

Garrett said: “You really want a broker that has handled some of your peers. So if it's last mile delivery, if it's ride share, there are a ton of lessons learned the hard way... why not learn those lessons and avoid those pitfalls if you can.”

The Financial Benefit: Saving Premium Dollars

When a broker and underwriter truly understand the platform’s business model and its proactive Trust & Safety measures, they can often reduce the final premium.

“Oftentimes when they understand... all of the things you're doing for trust and safety... your premium [is] lower than kind of the industry in which you're kind of operating more generally.” Jeremy said.

A broker can also help a platform see where they are underinsured (creating coverage gaps) or double-spending on unnecessary products, leading to major cost savings over time.

4. Essential Policies for Early-Stage Startups

Founders often ask, "What insurance do I need right now?" Johnson offered a high-level overview of the foundational policies every early-stage platform should investigate:

• General Liability (GL): This is the baseline, often required in commercial contracts. It covers liability from slips, falls, libel, slander, and bodily injury. Note: Risks vary wildly—a platform with in-home services has a much higher GL exposure than a platform with no physical presence.

• Directors and Officers (D&O): This protects the executive team and board from allegations of fraud, mismanagement, or anti-competitive claims. It becomes table stakes for attracting good board talent as you scale.

• Commercial Auto: If the platform owns vehicles, this is mandatory. If the platform only utilizes vehicles brought by its service providers (rideshare, delivery), a very different but equally important insurance setup is required.

• Errors and Omissions (E&O): This covers professional service liability. If a third party alleges the platform failed to live up to its obligation of providing a professional service, E&O responds to that exposure.

• Cyber Insurance: (Also emphasized in the book) Covers costs associated with data breaches, system compromises, and related liabilities.

  
  

Key Takeaways: Insurance is not static. As your business grows (e.g., expanding into a new state like New York or 10xing your revenue), your insurance needs and costs will scale exponentially. Proactive planning saves you headaches and millions of dollars down the road.

Hear the podcast here: https://www.marketplacerisk.com/podcast/episode/91994900/managing-risk-insurance-policies-and-program-design