Professional indemnity insurance is known to be popular amongst areas of expertise like accountancy, architecture, medicine, or the law. It is also highly useful to anyone giving professional advice, consultancy, or design work. PI insurance is not legally compulsory; however, some organizations will only work with a consultant who has some form of PI insurance cover in place. So, see the things to know before Buying Professional Indemnity Policy.
Basically, PI insurance is something that protects businesses and individuals against any liability arising from advice or service provided and has gradually become popular; attracting an increasing number of professionals every year.
How does Professional Indemnity Policy offer protection?
Clients unhappy with a service or advice may levy varied types of claims; which professionals require to protect themselves from; by taking the right professional indemnity insurance policy. The different areas where one needs to be careful include-
- Misplaced data – where someone may have lost important paperwork; documents or data belonging to a client
- Carelessness – where one has been careless or has violated the duty of care to the client
- Intellectual Property (IP) – where one may have by mistake infringed copyright, trademarks, or other types of IP owned by other businesses or individuals
- Offense – where one may have produced or used material about other organizations, which might have offended the business
- Deceit – where a person from the business might have stolen from a client
Besides this there are many other scenarios for which professionals may require acquiring insurance; however, all PI policies do not cover a person for each and every scenario. Hence while researching policies it is important to know exactly what each policy covers and what type of protection the business needs.
For this reason, there are a few things a professional may want to consider before finally buying a professional indemnity insurance policy. Here are some important things one needs to know before taking the policy.
Assess the budget
This can be difficult as usually there is always a difference between how much cover a business can purchase compared to how much risk it can accept. Therefore a professional needs to realistically assess how much they can afford to pay as a premium; and then look into the potential rate of incidents that can occur, along with contracts and legal requirements before fixing the budget.
Currently tough economic situations and tight budgets make it hard to match up to the increasing amount of litigations and their costs. But the good part is that the insurance market has kept premiums at a reasonable level; making it easier to get the right insurance; especially for businesses operating in emerging professions.
Ascertain risk & exposure
Any professional providing expert advice or service is susceptible to some sort of risk or exposure; hence must consider some sort of PI insurance. Earlier it was easy to classify professionals like solicitors, accountants, and surveyors; however today the categories have grown with experts in varied emerging fields like technology, marketing, creative design, broadcasting and management consultancy, and so on.
Hence the easiest way to ascertain if a person has any sort of risk liability is to gauge if they are providing any sort of expert advice or service.
Insurance broker services
Another thing to consider before buying a professional indemnity insurance policy is whether one should buy it directly from the insurer or is it better to use the services of an insurance broker.
Generally, the role of a broker is to act as a medium between the client and the insurance company; being specialists in their field they can provide expert advice to varied clients. Their job entails leveraging their knowledge about the different insurance products with the risk liability of a client. They are specialized in studying aspects such as the scope of cover, service, cost, and solvency of insurers.
Besides this they too as experts require to purchase insurance protecting against their own errors and omissions, which makes the client more secure in case of a mishap. Hence working with a broker provides various benefits; though while dealing directly with the insurer may cost lesser; the cost savings would be minimal. Hence getting a broker with good past experience in advising people within the industry is a win-win situation while buying an insurance policy.
Contract conditions & policy
A highly important factor here is the type of cover the customer base expects a business to have. There has been an increasing trend where certain customers only trade with the business if it has a specific level of insurance, within the contract conditions agreed upon by the professional and their customers. While some customers require proof of insurance from the business; before approving and accepting it as a vendor to whom they can offer a contract tender.
Hence before buying Professional Indemnity Policy would be good to have a general idea of what the competitors are buying; to prevent losing out on contract tenders to other competitors.
The right type of product
With varied different types of insurance available in the market; PI insurance needs to be considered as a product with value, and not an unwelcome intangible cost. There are many levels of protection covers one can choose from, but picking the right one is critical for any business.
Can consider comprehensive policy; along with various other products that have developed over the last few years offering highly valuable breach of contract cover; with breach of contract being a common claim easier to prove as compared to negligence. All in all, one needs to choose the insurance that is not only most suitable for that particular industry and profession but also affordable; hence not being a burden on the business along with providing appropriate protection.
This implies looking into where the business is operated and where the customers are based. Here it is necessary to look into the geographical limits and jurisdictional limits on an insurance policy. The geographical limit is the physical location where the advice or service was provided; while the jurisdictional limit concerns which law claims can be brought against a business.
Getting a wide scope of cover may be more costly, with a lower level of indemnity than standard ones. Hence one must only pick a wider scope of exposure; if they are going to expand their marketing area and customer base in the near future; along with taking into account the higher cost of a wider scope of cover.
Besides these, there are various other factors that can be considered before buying a policy like – the type of industry, increased specialization of expertise that leads to higher litigation costs, how much coverage should be bought, social responsibility, and so on.
Eventually being properly insured means having good corporate social responsibility and social ethics. It shows that the business has taken the right step to safeguard the business, employees, and customers against any future risks.