An increasing number of SMEs in the UK are seeing the value in protecting their businesses with professional indemnity insurance.
According to a new report by Timetric UK FS Intelligence Centre, this insurance sector has expanded rapidly since 2012.
The current annual growth rate is 7.15% and this is predicted to continue rising considerably, with businesses expected to be paying out in the region of £1.5 billion for PI cover by 2019.
So what’s making more and more companies and freelancers seek this essential insurance?
What is professional indemnity insurance and who needs it?
Professional indemnity covers the potentially huge costs of handling compensation claims from clients for the likes of defamation, copyright infringement, breach of contract, professional negligence and loss of data.
The costs covered by PI include the business’ legal fees along with the compensation amount and legal expenses of the claimant, should they win.
Small businesses offering advice or professional/creative services to clients need this type of cover.
PI insurance should be a no brainer for SMEs and independent contractors working in areas such as consultancy, design, photography, IT, marketing, public relations, architecture, engineering, journalism, tutoring and translation.
Giving inaccurate advice, making a small mistake that causes a client to lose money or accidentally revealing confidential information are some of the situations that could result in claims being made.
Why is PI cover more essential than ever for small businesses?
While there’s no legal obligation to take out this type of cover, there seems to be a general consensus that, in today’s complicated world, businesses simply can’t afford not to have this protection.
This is especially the case for smaller companies and freelancers who simply wouldn’t be able to handle the financial burden of dealing with compensation claims without having professional indemnity insurance to fall back on.
Here are just a few of the reasons why there’s an increased risk of businesses being sued nowadays.
We live in a world where clients can decide to take action against businesses for countless reasons.
Recent figures show that UK liability insurers are paying around £6.8 million in compensation claims per day; more than £2 million of this mammoth sum is paid out by businesses.
It’s no wonder then that liability law is such a thriving market for solicitors and that an increasing number of British SMEs are making the decision to protect themselves by taking out professional indemnity insurance alongside other important elements like public liability (for facing claims from members of the public) and employers’ liability (for facing employee claims).
Social media and copyright laws
Individual businesses now face intensified public scrutiny thanks to the emergence of social media as a popular tool for everyday communication.
Business owners having the ability to publish information and comments so quickly and easily can be a defamation lawsuit waiting to happen.
Similarly, digital marketing businesses and public relations professionals responsible for maintaining social media channels for businesses are more susceptible to accidently publishing inaccurate or confidential information that could land their client in hot water and result in a claim.
Social media can also be a nightmare waiting to happen for business owners who aren’t too savvy when it comes to copyright law.
Especially with the emergence of photo-centric channels such as Pinterest and Instagram, businesses lifting images without the owner’s permission, quite often not realising the potential consequences, are finding themselves being threatened with copyright infringement and having to pay out substantial figures.
Is your business protected with professional indemnity insurance? Get in touch with The Insurance Octopus for a quote on a bespoke business insurance package tailored to your needs.