In March this year, IndiaMART, one of India’s largest B2B e-commerce platforms, suffered a critical data breach, compromising the confidential details of over 40,000 suppliers. This classified information included contact numbers, ema, and other business-related sensitive information displayed on underground wasms for sale. This incident reminded everyone that even the best SaaS companies are not immune to cyberattacks. Such breaches expose businesses to monetary losses and reputational issues at levels no less significant. For most SaaS companies dealing with critical customer information that makes indispensable use of cloud infrastructure, cyber insurance has become the need of the day in order to tackle the rising landscape.
Overview of the Growth and Dependency of the SaaS Industry on Cloud-Based Solutions
India’s SaaS industry has increased of late. According to a report by Bain & Company in India SaaS Report 2022, the sector has become one of the key growth drivers for the Indian software landscape, with more than 1,000 SaaS companies contributing significantly to the digital economy. This ranges from the smallest startups to the most prominent enterprises and heavily relies on cloud infrastructure to provide scaled software solutions.
The continual shift of more business operations into the cloud increases the vulnerability of attacks due to increased cyber-attacks. The global usage of SaaS solutions embedded into business operations makes these platforms highly valued by cybercriminals. Increased utilization of cloud-based systems in India makes it critical for providers to implement robust cybersecurity measures, which should include cyber insurance. A breach, such as that witnessed in the IndiaMART case, might be extreme enough to have serious implications beyond financial loss, including legal liabilities and long-term reputational damage.
Industry-Specific Cyber Threats
Cyber threats to SaaS companies are unique as they depend on cloud-based services. Here are some common and emerging ones:
- Data Breaches: As reported by data sources, unsecured databases, and cloud systems leave sensitive customer and business data open to attackers. IndiaMART is a shining example of SaaS platforms’ vulnerability to data theft.
- DDoS Attacks: Distributed denial-of-service attacks can cause significant operational disruption by flooding servers with traffic, making SaaS services unavailable to customers.
- Insider Threats: SaaS providers consider internal employees and contractors who are allowed access to certain sensitive information insider threats. Accidental or malicious actions from within can lead to a data breach or service outage.
- Supply Chain Attacks: As third-party solutions become part of these SaaS platforms, supply chain attacks become a possibility for them, too.
For example, the MOVEit Transfer breach in 2023 proved weaknesses in cloud services regarding the inclusion of third-party software. They can lead to severe operations downtime, data loss, and financial loss for SaaS companies. The increasing incidence and complexity of such attacks indicate the high requirement for full cyber insurance.
Coverages Provided by Cyber Insurance for SaaS Organizations
Cyber insurance is the last backup for SaaS organizations when covering financial losses from cyber attacks. Some of the coverages include:
- Data Breach Response: Pays for consumer notification, forensic studies, and attorney fees. In the case of a data breach like IndiaMART, this will help alleviate much of the cost associated with a breach.
- Business Interruption compensates for lost revenues when the business cannot operate due to a cyber attack, such as a DDoS that could shut down an enterprise’s SaaS platform for hours or days.
- Third-Party Liability: SaaS companies store sensitive customer data. In case of a breach, third-party liability coverage helps to bear the legal costs and compensation related to the loss of client data.
- Ransomware Attack Coverage: As ransomware has become a growing threat worldwide, this particular coverage helps the SaaS company restore business operations in case of an attack by paying off ransoms or facilitating data recovery.
- Regulatory Fines: Companies like SaaS require huge compliance with regulations, such as GDPR, CCPA, and India’s data protection law. In most cases, cyber insurance policies today carry additional regulatory coverage for fines and penalties due to non-compliance.
Regulatory and Compliance Considerations
As the days go by and data protection awareness increases, regulatory compliance becomes a high priority for SaaS companies. SaaS companies in India have to fall into many local and international regulations, some of which include:
- The Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011: This law demands industries, in general, and SaaS companies, which process sensitive information, in particular, to adhere to stringent data protection norms.
- General Data Protection Regulation (GDPR): European or customers’ serving companies subject to GDPR must incorporate stringent data security measures.
- California Consumer Privacy Act (CCPA): The CCPA is another regulation that applies to organizations that do business with California residents. Organizations must be very active in data protection practices.
Cyber insurance helps serve the needs of regulations because it covers damages due to penalties, attorney fees, or other violations against the regulatory body.
Selection of the Right Cyber Insurance for SaaS Companies
While selecting a cyber insurance policy, SaaS companies must consider the following aspects:
- Data Sensitivity: A company handling extremely sensitive data in financial or healthcare is likely to require policies that provide more extensive cover for any data breach.
- Customer Base Size: The larger the customer base, the more critical it is to have comprehensive cyber insurance that could cover many affected users in case of a breach.
- Service Uptime Requirements: SaaS platforms that ensure high uptime for customers require coverage for business interruption and associated financial losses from downtime.
Work with an informed broker who tailors policies to meet the specific needs of a SaaS company. This helps track coverage gaps and thus ensures that the company’s risk profile is well aligned with the policies.
Other Liability Risks for SaaS Companies
Besides cyber risks, some other liability risks for a SaaS company include:
- Product Liability: When a SaaS solution breaks down or fails to deliver its promised performance, clients may file a lawsuit claiming loss or damages.
- Risk from Litigation: Contract, service-level agreement, and intellectual property breaches may attract litigation against a SaaS Company.
- Directors & Officers (D&O) Insurance: This type of insurance will protect the company’s officers in case of a lawsuit against mismanagement or breach of fiduciary duty.
Mitigata’s Expertise in Cyber Insurance for SaaS Companies
At Mitigata, we focus on providing bespoke cyber insurance solutions for SaaS companies, recognizing and covering their unique risks. Our policies also protect businesses against various data breaches, ransomware attacks, resultant regulatory fines, and more. We also provide risk management tools, which help SaaS companies assess their vulnerabilities and strengthen their cybersecurity posture.
By combining your efforts with those of Mitigata, SaaS companies will be better prepared for any change in the cyber threat landscape while staying on top of the latest regulatory requirements.
Quick Read: E-commerce Client Recovers from Data Breach and Ransomware Attack.
Why SaaS Companies Need Cyber Insurance in 2024?
The stakes have never been higher for SaaS companies in 2024, as the breach of IndiaMART and MOVEit vulnerabilities has shown that even the best platforms are perceived as easy targets for cyberattacks.
Cyber insurance will be disastrous in terms of finance and operations, Without which it is the topmost security aspect for SaaS companies to invest in its thorough cyber insurance. This will not only cover the financial loss but also give a way through which businesses can stay well-balanced with the complexities set by the regulatory environment.
Act Now: Protect your SaaS company with tailor-made cyber insurance solutions developed at Mitigata. Contact us for a demo arrangement and learn how we can help you protect your business from increasing cyber threats in 2024.
Frequently Asked Questions (FAQs)
1. What is the coverage given to a SaaS company under cyber insurance?
Typically, cyber insurance for a SaaS company covers data breach response, business interruption, third-party liability, and ransomware attack recovery, among other things.
2. Why do SaaS companies need cyber insurance?
SaaS companies handle enormous sensitive customer data, making them prospective targets for cyberattacks. Cyber insurance helps protect the company’s finances from breach costs, regulatory fines, and business interruption.
3. How can cyber insurance increase regulatory compliance?
Cyber insurance can offer protection against fines, legal fees, and penalties for non-compliance with data protection regulations like GDPR and CCPA. This ensures that SaaS companies always have sufficient financial capacity to deal with regulatory disputes.
Also Read: The Role of Cyber Insurance in Incident Response Plans
