SaaS Insurance
What is SaaS insurance and how can it help protect your software business?
The rise of SaaS (software as a service) has seen many businesses shift from on-site servers or data centres to cloud-based subscription services. Saas companies should carefully consider their insurance requirements as they are exposed to negligence and breach of contract allegations - they can also process large amounts of customer data, therefore at higher risk from cyberattacks and data breaches.
What is SaaS insurance?
There is increasing reliance on software as a service providers and the disruption caused by failures, negligence, or mistakes can have servere financial consequences for the businesses that rely upon them. Saas providers should ensure they have adequate insurance protections in place to guard against claims for compensation. Saas insurance is a term that includes a number of different insurance covers for software as a service and providers. Below we take a look at each of the different covers available to tech companies and identify why they are important.
Professonal indemnity insurance
Breach of contract claims are becoming increasingly common and the most important insurance cover a saas platform provider can purchase is professional indemnity insurance. Otherwise known as professional liability or tech errors and ommissions (E&O) cover for North American clients. Failure to meet service delivery standards or data breaches can mean clients seeking compensation claims. Saas professional indemnity can also cover negligence, breach of professional duty, breach of contract, defamation, breach of privacy, and unintentional intellectual property infringement.
Cyber liability insurance
If a cyberattack brings down your saas platfform, the impact can have servere financial reprecussions. How you respond in the first 24 hours can have signifciant bearing on the damage caused. Cyber insurance can cover the cost of incident response, cyber extortion, forensic investigation, legal advice, notifying individuals their personally identifiable information was stolen, regulatory fines, system damage, and the business interruption calculated by a loss of profits during the downtime. With malware attacks, phishing scams, ransomware, and denial-of-service attacks on the rise, it is prudent to be covered if you are unfortunate enough to become a target.
General liability insurance
General liability insurance will typically be included to protect the day to day running of the business, otherwise known as Public and Product Liability in the UK. Even if you opperate a working from home policy these insurances are typically recommend because the additional cost is marginal. Then it is worth remembering, if you have employees you will be legally required to purchase employers' liability insurance.
Directors and officers insurance
The regulatory and legal landscape continues to evolve with an ever-increasing burden paced on directors. Directors' and officers insurance is purchased to provide financial protection to the company's directors and board members against civil liabilities, regulatory proceedings and criminal allegations. Not everyone appreciates that individuals that accept roles as directors, senior managers, and board members can be held personally liable whist making decisions on behalf of the company. The cover is also commonly requested by new and existing investors, given the cover can offer protection to shareholders.
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How much does saas insurance cost?
The rather unsatisfactory answer is it depends. Your turnover will be the largest driving factor that impacts your insurance premium, startups should provide conservative protections when applying for cover. There are several factors used to calculate the cost of saas insurance including the number of employees, nature of the services, the volume of data held and if this data is special category data, any previous claims, and whether you contact under US law and jurisdiction.
It can be cost-effective to combine your software company insurances, but that is not always the case in securing value for money when purchasing saas insurance. Talk to one of our account executives to discuss your requirements.
Certificates of saas insurance
Its common for B2B models that 'certiciates of insurance' are requested. Businesses that companies that choose to use your software as a service want the assurance that you purchase appropriate insurance covers to protect them should something go wrong. Professional indemnity combined with cyber liability insurance are usually the most important covers your counterparties will require evidence of.
Why do saas companies need adequate insurance protection?
Saas insurance can be a vital tool to provide protection against a range of financial shocks that can threaten technology companies, provide confidence to counterparties who rely upon the service offered, and provide access to cyber incident response specialist and forensic accounts.
Growing pains
Saas insurance allows companies to innovate and grow, mistakes can sometimes happen as they scale up to meet the increasing demands of customers.
Investor requests
Many investors request that directors and officers insurance is purchased to ensure their is policy to claim against, and to protect board members.
Contractual requirements
Your clients may require you to hold certain amounts of insurance to give them assurance you have the resource available to claim compensation.