Insurance Needs for Sales Tech CompaniesInsurance Explained
The mission of sales technology companies is to develop solutions that help organizations drive sales efficiency. This means giving salespeople better access to customer information that’s needed in building a bridge between marketing and sales efforts that will lead to greater conversions of prospects into buyers.
While sales tech may not be as big as adtech or martech today, 65% of B2B organizations cite sales productivity as the number one challenge they face daily. This increasing concern is quickly making sales tech solutions a key element in the business technology landscape. The current sales tech ecosystem consists of more than 700 tools – up from around 300 in 2015.
Additionally, the rise of cloud computing has made sales software solutions considerably more flexible and efficient, allowing end-users to instantly scale their sales infrastructure to suit their needs, increased security, and create better opportunities for collaboration. This increased efficiency, combined with the rise of digital selling, has made sales software extremely attractive to venture capitalists, attracting almost $2 billion in funding over the past year.
Evaluating the Potential Risks for Sales Tech Companies
There are two major risks that sales tech companies and their customers are exposed to most commonly:
A data breach is a security incident in which sensitive data is accessed and used without proper authorization. Modern sales technology solutions are especially vulnerable to data breaches since they store so much of an organization’s company information, from corporate intelligence to sensitive customer data. This means that a data breach caused by a flaw in your software could have a devastating effect on your user’s business, which can lead to lawsuits.
Organizations that use your software solutions rely heavily on them for their revenue-generating activities. While this reliance is good from the perspective of a continued subscription to your software, it can also present a severe risk. Any potential downtime or software failure can be very expensive for your users and thus result in them holding you liable for their losses.
Highly-Publicized Examples of Insurance at Work for Sales Tech Companies
- Salesforce users experienced a service failure due to a faulty database script after the company made changes to its production environment. Due to this failure, all users had access to all the data their company had stored, even if they lacked the proper permission for viewing it. See: Salesforce suffers major outage providing data access irrespective of the permission settings
- Redtail, a popular CRM solution for financial advisers, suffered a data breach that may have exposed sensitive client information. See: Redtail CRM data breach exposes personal client data
- Software firm Maximizer Services Inc. filed a lawsuit against a former executive and his new employer, tech company Salesforce after he allegedly jumped ship to the competitor less than a year after starting his job at Maximized. See: Vancouver tech firm Maximizer sues ex-employee and Sales Force competitor that hired him
Recommended Coverage for Sales Tech Companies
In the growing and competitive sales tech market, the importance customers place on sales tech solutions and the sensitive data being used make lawsuits a distinct possibility and risk management an important factor to consider for sales tech companies.
- Technology Errors & Omissions (E&O) Insurance: Sales tech products are classified as services by insurance carriers. Consequently, a technology E&O insurance policy is crucial for protecting your company in cases where a client suffers damages due to a data breach caused by your product or the failure of your software to provide its promised services.
- Cyber Liability Insurance: A cyber liability policy will pay for costs associated with data breaches and cyberattacks to your system. Additionally, a comprehensive cyber policy should typically include third-party coverage. This means that it will cover lawsuits by those parties impacted by the data breach as well as pay for any notification expenses, PR costs, cyber forensics, and credit monitoring. You can expect your cyber liability and tech E&O policies to be combined in order to effectively respond to the complex set of risk your sales tech company can face.
- Directors and Officers (D&O) Insurance: D&O insurance serves to protect both the company and the personal assets of its leadership from lawsuits alleging breach of fiduciary duty, misrepresentation, or mismanagement. Additionally, VCs will consider D&O a requirement for funding, as they will expect a seat on your board of directors.
- Workers Compensation Insurance: Workers comp is mandated by law in every state except Texas. Therefore, securing workers compensation coverage is a legal obligation, not a choice. It will address the medical costs and any lost wages if an employee is hurt while working.
- Employment Practices Liability Insurance (EPLI): The EPLI policy will pay for legal costs and settlements for claims related to issues such as wrongful termination, harassment, and discrimination. With data showing a steady increase in EPLI claims, this line of insurance has become a crucial consideration even for smaller tech companies with only a handful of employees.
- Commercial Crime: Crime insurance policies will cover crime-related losses the company suffers, from company employees or third parties such as embezzlement or fraudulent transactions. For sales tech companies, a crime policy would provide protection from both physical and electronic loss of funds, securities, or property.
- Key Person Life Insurance: Key person insurance will help you recover from the death or disability of a crucial member of the organization, i.e. founder, CEO/CFO or lead developer, by paying for recruitment costs and financial losses resulting from the person’s demise or inability to continue working.
- Intellectual Property Insurance: The sales tech marketplace is highly competitive and crowded, which makes Intellectual Property (IP) litigation a considerable risk. IP insurance would protect the company from infringement claims filed by other organizations and individuals. Alternatively, it can address legal costs associated with actions in protecting your IP.
It is crucial to work with the right partners who understand your unique needs and exposures to ensure you obtain the proper tech startup insurance for your sales tech company.
If you need more help or information about protecting your business, you can reach out to our team of expert brokers to learn more.
Even on the advice of a broker, how do you actually know you’re paying a fair price for your Directors and Officers (D&O) coverage? The answer lies in due diligence plus asking your insurance broker the right questions. Here’s the key advice to consider: Know your average costs of D&O …