The Enterprise/SaaS space is hot spot for startups. In 2017, SaaS companies captured 69% of a 63.2 billion dollar public cloud services market. We work with several companies building enterprise/SaaS solutions, ranging from data collection to “consultative sales” to outpatient management and all done in the cloud.
Though these companies all have very different target markets, sales cycles, and much more, their risk profiles in the eyes of insurance carriers are similar in some very distinct ways. So why do SaaS companies need insurance?
1. Product use
Almost all products in this space have a common use or characteristic: storing data. And more often than not, the data is personal, sensitive, or otherwise confidential. Stored data ranges from Personal Identification Information (“PII”), to credit card numbers, to medical records, and more in the 3 examples I just cited. Collecting, recording, or storing any of this information opens a company up to lawsuits based on data breaches, which you’ll know (if you’ve read this post) are expensive and occur more often than you’d think.
This general characteristic of Enterprise/SaaS products makes a Cyber Liability policy totally worth it. A good cyber liability policy will cover the costs associated with lawsuits due to any type of data breach, whether it is caused by hackers, denial-of-service attacks, employee negligence, and much more. It can also cover the costs of business interruption incurred by the data breach and compensate for the loss or theft of intangible electronic property.
2. Customer reliance
Customers rely heavily on their Enterprise or SaaS products. And Enterprise/SaaS companies want to foster that reliance because most of the money made in the space comes from recurring revenues generated by existing clients. The SaaS model in particular essentially runs on renewals.
When you have a tech business that encourages its customers to rely on its product, any product downtime is completely unacceptable. If your platform goes down, your customers lose money…and you get blamed for those losses! Furthermore, even if your product is working, but it’s not working up to certain customers’ standards, they might still sue you (for negligence, misrepresentation, or failure to perform, for example).
A good Errors and Omissions (“E&O”) insurance policy will cover you for losses related to product failures or malfunctions and customer-satisfaction-related lawsuits. E&O insurance will compensate you for the legal fees, settlements, damages, and any financial loss you suffer in dealing with the claims.
You can have the best product on the market, but that doesn’t stop over-demanding customers from bringing lawsuits. And even if you have all your “ducks in a row” and will likely win every case, someone still has to pay the legal fees. Errors and Omissions insurance can mitigate these costs and protect you if and when something goes very, very wrong.
Though Enterprise/SaaS companies have an abundance of applications across all industries, their risk exposure remains somewhat uniform. A quality suite of insurance products with strong Cyber Liability and Errors and Omissions policies can mitigate a lot of the risks these companies face.