What Insurance Do SaaS & Enterprise Cannabis Startups Need?

Although these companies have varied sales cycles, target markets and so on, their risk profiles are similar from an insurance carrier’s perspective, mainly because of the following factors.

1. Product Usage

Almost all products in the cannabis-related SaaS and enterprise arena share a common function: data collection and storage. And most of the time, that data is either sensitive or confidential.

What kind of stored data are we talking about? Personal identification information (PII), credit card numbers, medical records and purchase history to name a few.

Collecting, recording or storing this type of information exposes a cannabis-related SaaS & enterprise company to lawsuits because of data breaches. Cyber liabilities, such as a data breach, are often expensive and impact businesses much more frequently than you’d imagine.

This type of real-world vulnerability for SaaS & enterprise businesses makes a cyber liability policy an obvious solution. A robust cyber liability policy will cover the cost associated with lawsuits related to any type of data breach, whether created by hackers, employee negligence and denial-of-service attacks, to name a few.

A cyber liability insurance policy for a SaaS or enterprise startup in the cannabis arena can also cover the costs of business interruption incurred by a data breach as well as compensate for the theft or loss of intangible electronic property.

2. Customer Reliance

Figure it this way: customers rely heavily on their enterprise or SaaS product. In turn, these companies want nothing more than to foster this reliance. Most of the money made in the SaaS & enterprise industry comes from recurring revenues generated by existing clients. (The SaaS realm in particular runs primarily on renewals).

So of course, whenever a cannabis SaaS and enterprise company encourages that kind of reliance, any downtime is brutal. So if your platform goes down for any reason, your customers can lose money. (And you can guess who they’ll blame.) MJ Freeway is the unfortunate poster child when it comes to an outage that has detrimental effects on clients.

In addition, even if your product is working but not up to certain customers’ standard, they still might sue you (for negligence, failure to perform or misrepresentation).

A sturdy errors and omissions (E&O) insurance policy will cover your cannabis company for losses related to product failures, malfunctions and customer satisfaction-related lawsuits.

E&O insurance will also compensate your cannabis company for legal fees, damages, settlements and any financial loss you suffer in dealing with the claims.

You can have the best SaaS or enterprise product on the cannabis market, but that doesn’t stop over-demanding customers from tossing lawsuits your way. E&O insurance will mitigate these costs and protect your cannabis company from real damage.

Even though enterprise/SaaS companies in the cannabis industry specialize in a wide variety of applications, their risk exposure remains somewhat the same. A “high tech” suite of insurance products with cyber liability and errors and omissions insurance policies can provide your startup a new level of security.

Protecting your cannabis company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by emailing [email protected] or calling 646-854-1093 to learn more about your cannabis insurance options.