Professional Indemnity Insurance: Don't Skimp, It Could Save You!
Service and advice-based businesses, beware.
Correlating closely with the recession, more and more claims are being filed against those businesses providing advice and consulting services. Claims against the NHS alone rose some 30% in 2011.
Where many businesses have been negatively affected by the recession, they have been filing claims amidst losses, in many cases placing the blame on those who advised them in the first place. It may be that the advice came a little too late, wasn't followed appropriately, or may have been genuinely damaging. Either way, a service and advice-based business needs to protect its credibility and professionalism so that when a client files a claim, their reputation isn't brought into disrepute.
Malcolm Tarling, the Senior Media Relations Office at the Association of British Insurers warn that businesses offering these kinds of services need to cover themselves with professional indemnity insurance to keep their peace of mind.
Mr Tarling explains that in the event that a businesses advice leads to a client's financial loss, such insurance can protect them in the event that an employee's advice was shown to be genuinely negligent. An important point of note given that such cases increased considerably in the UK last year.
As with many forms of Business Insurance cover, your profession and industry will largely determine the eventualities you need to be covered for. Web Designers and Digital Marketing Agencies will need to be covered for issues arising from the systems and solutions that they provide based upon their consultancy, whilst solicitors and financial advisors would need to be covered for a differing scope of outcomes.
Many small businesses are put off by the initial outlay involved in attaining such cover, knowing that it isn't compulsory; those just setting up and those best by hard times will generally refrain from investing in such a policy. What they sometimes fail to recognise however is that it only takes one client to make a successful claim to ruin their fledgling organisation.
Mr Tarling goes on to point out that these businesses should take into consideration the potential financial consequences if they were found to be negligent due to erroneous advice.
"It is not there to cover all losses that may stem from the advice that you've given, because you can't control a lot of events, but it's designed to cover events where it is shown that you have given negligent advice."
So if you value your professional standing and your brand, such cover is almost a necessity. If you decide to safeguard your business with a professional indemnity insurance policy, be sure to consult with a specialist business insurance broker to cover yourself against the most prolific eventualities.