Why Professional Indemnity Insurance Is Essential

What if you provide advice and consultancy and there’s a mistake in the advice you’ve given? What if you provide an expert service and there’s a mistake in designs, plans or calculations? What if you handle people’s information and you face claims that you accidentally disclosed data or infringed on a client’s legal rights?

If you provide advice or professional services to clients, you should consider having professional indemnity cover. Professional indemnity insurance protects your business if you’re found to have provided poor services or given bad advice resulting in your clients or others suffering a financial loss. It makes sure you are covered in the event you are sued for perceived sub-standard or incomplete work, mistakes such as breach of confidentiality, defamation, loss of documents and dishonesty of employees.

All claims which could be costly and disruptive, even if you dispute the allegation, and very often legal defence fees escalate into hundreds and thousands of pounds.

Professional indemnity insurance isn’t a legal requirement, but it brings peace of mind. If you don’t have it and something goes wrong for a client following your advice, your business could be responsible for the legal fees, expenses, compensation costs or other costs incurred in your defence. Even when you win a PI court case, it still costs you in terms of legal and defence fees, so it is important to be covered.

Businesses large and small take out professional indemnity; it’s an essential insurance in an increasingly litigious environment if you provide professional service advice or handle client data and intellectual property. Indeed, in a 2018 survey of 300 small business owners, three quarters said they worry about making mistakes on client projects, almost half worried about giving bad advice and a quarter worried that one of their clients would make a compensation claim related to their professional services.

5 reasons you need professional indemnity insurance:

• 1. It may be compulsory

  For some professionals, such as lawyers, doctors and estate agents, it’s mandatory to have PI cover in place. For other businesses, a professional body or industry association may require. Or, a client may insist you have it in place before you can start working for them or even providing a tender.

•  2. It offers peace of mind

  As diligent as you endeavour to be, sometimes things go wrong and you may find yourself in a situation where a third party is accusing you of negligence or a breach of a professional duty. Of course, you hope you’ll never have to use your PI cover, but it’s there to provide you with peace of mind that you’re protected.

• 3. It covers you financially

  Many businesses wouldn’t be able to cope with the serious financial hit that can arrive with an indemnity claim. With PI cover in place, you and your business are protected financially against the potentially damaging cost of a claim.

• 4. It protects your reputation

  If you’re accused of negligence or a breach of professional duty this could irretrievably damage your professional reputation. Your professional indemnity cover means you can use legal avenues to challenge erroneous claims and clear your name without having to worry about the related costs.

• 5. It shows professionalism in your business

  You want to provide quality service in your business. As part of that, you need professional indemnity insurance in place to show that you’re willing to cover both yourself and your business in the event of a claim.

Professional indemnity does not have a one size fits all approach and so each policy needs to be tailored to individual requirements. The market is experiencing dramatic change and premiums are increasing, and the cover some businesses are able to source are proving difficult.

 What is a retroactive date on professional indemnity insurance?

How much does it cost?

There are several things to consider, like the level of cover you choose and the type of work you do if your business has grown or changed activities, and if you work in higher risk sectors such as rail, aviation or construction - to name just a few - then you require a detailed review and a broker that will discuss your activities with insurers.

It is important to spend time to complete a full review of your present business activities and present this to insurers in good time. Simply sending a form to an online broker will not be sufficient and a full consultancy approach is needed.

There is a choice of cover available, but speak to a specialist broker who actually sits in front of the insurer and takes the time to run through your business, the people and types of contract you work on and could work on in the future. If you have not met your broker, you really should not be purchasing PI cover from them. How will they know your business and ensure your present and past activities are actually covered?

 These policies cover:

• Your defence costs – including solicitors’ fees and expert counsel • Compensation bills are paid

 You can also add various optional extras to your professional indemnity policy and in some cases package other policies that include:

• Data protection and copyright breaches • Defamation • Breach of confidentiality • Business equipment • Loss of documents • Bodily injury (from breach of professional duty) • Dishonesty of employees • Court attendance costs • Public liability • Employers’ liability • Directors and other liabilities

Every business is different and it is important that your exposure is reviewed and presented to the market to obtain the best terms for coverage – not just the cheapest that have very little cover in place.

At Ascend we provide you with a full consultancy advice-driven review service. Speak to one of the friendly, experienced Ascend team.

If you need advice, please contact us at Ascend Broking and we will be happy to help.

Matthew Collins Managing Director 01245 449060