Professional Indemnity Insurance
Here at the Insurance Knight Consultancy, we get a lot of enquiries about Professional Indemnity Insurance. Business owners know that they should probably have this type of insurance, but often don't fully understand what it entails. We've put together this guide to help you understand exactly what PII is, and why it is important for your business.
What Is Professional Indemnity Insurance?
Professional indemnity insurance covers compensation claims and legal fees if your business is sued by a client due to a mistake or negligence in your work which causes the client to suffer a financial loss. Professional indemnity insurance applies to all types of businesses which provide a professional service or offer advice to clients.
What Exactly Is Covered By PII?
Professional indemnity insurance covers compensation payments and legal fees if a client makes a claim against you. The amount of compensation is usually calculated based on the financial loss that the client has suffered. Even small mistakes can result in catastrophic consequences for your client. That's why it's so important that you have PII cover for your business.
PII covers your business for the following:
- loss of documents/data
-professional negligence or breach of duty of care
- unintentional use of copyrighted images, texts etc.
- unintentional breach of confidentiality
- defamation or libel
Do I Need Professional Indemnity Insurance?
Could you afford to defend a legal claim against your business? Business disputes happen all the time and, unfortunately, the costs can run into tens of thousands, or even more if you are asked to provide compensation to your client. Even if you have done nothing wrong, a client could still potentially lodge a claim against you, leaving you with expensive legal fees. Having PII can give you peace of mind that these costs are covered.
If your business offers a professional service, gives advice, processes customer data or handles intellectual property belonging to a client, then you may need professional indemnity insurance. Many regulatory or professional bodies require their members to have PII. For example, if you're a chartered accountant or chartered surveyor, then one of the criteria for Chartered status is that you have PII in place. It also applies to architects, solicitors, financial advisers, and many other types of profession. Having PII can also reassure your clients that you are properly protected, should any problems arise. Another interesting point to note is that many large organisations such as councils will not accept tenders or contracts from companies who do not have PII in place.
PII is also common for businesses who handle data and intellectual property, so examples of the types of business this may apply to include: designers, IT consultants, data analytics, writers/journalists, etc.
Is PII Compulsory?
Professional indemnity insurance isn't compulsory by law but may be compulsory for some professions as detailed above. The only type of insurance which is legally required is employers' liability insurance.
Examples Of Claims
We often hear business owners who don't believe they need professional indemnity insurance because they are so experienced in their jobs that they never make mistakes. As we all know, mistakes happen sometimes, even with the best intentions. With that in mind, here are some examples of claims against businesses, for illustrative purposes:
- A web designer mistakenly uses a copyrighted image when building a new website for a client. The client is sued by the owner of the image, and the client then sues the web designer for compensation, damages, costs and expenses.
- A freelancer submits a final invoice for a project but receives no payment from the client. When the freelancer threatens legal action, the client opens a counter-claim, stating that the work was unsatisfactory. Even though the dispute is resolved in the freelancer's favour, substantial legal costs are incurred as a result of the claim.
- An inexperienced employee at an analytics firm accidentally deletes a client's entire customer database. The client sues the analytics firm for the cost of recovering the lost data, as well as business interruption costs and financial losses.
What level of insurance do I need?
When taking out professional indemnity insurance it's important to look at a number of factors including the size of clients you work with, the industry you work in, the types of projects/work you carry out, and what the potential worst case scenarios may be. Many regulatory bodies will specify a minimum level of PII cover required for members. For those who are not governed by any professional body or organisation, then you can usually take out any level of cover between £50,000 and £5million, and your insurance broker will advise on what is best for your business. The general advice though is to take the maximum cover you can afford.
The price of your professional indemnity insurance will vary depending on the type of work you do and the level of cover you choose. Here at the Insurance Knight Consultancy, we are experts in providing the right type of professional indemnity insurance for your business/industry. We have a panel of insurers and have access to Lloyds of London capacity, and offer policies from well-known and trusted insurers including Allianz, Angel Risk Underwriting, AXA, Beazley, HCC, Hiscox, Markel, QBE and RSA.
Please get in touch to discuss your professional indemnity insurance requirements, or to get a quote today.