If you provide any advice to your clients and customers, handle data belonging to them, or have any responsibility for intellectual property they own, they are entitled to expect a degree of professionalism shared by others who may be offering similar kinds of services, and it is worthwhile considering professional indemnity insurance.
If you make an error of judgment or provide misleading or inadequate advice, any customer suffering a financial loss as a result, may sue you for damages, alleging professional negligence on your part.
Depending on the nature of your business and the knowledge, skills and experience commonly needed to offer professional services, together with the extent of the losses suffered by an aggrieved customer, the damages may be considerable.
Professional indemnity insurance is typically designed to protect you against such claims and to offer cover for the – generally high – legal costs and expenses involved in defending any such claim (even though you may have done nothing wrong).
Who needs professional indemnity insurance?
In some professions, professional indemnity insurance is a condition of membership of the body responsible for regulating the work you do.
- if you are practising law, for example, your essential membership of the Law Society involves a mandatory £2 million of professional indemnity cover;
- members of the Institute of Chartered Accountants of England and Wales (ICAEW) require indemnity cover in proportion to their annual turnover, but not less than £15 million;
- the Royal Town Planning Institute (RTPI) also requires its members to hold professional indemnity insurance in proportion to earnings in any one year;
- and the Architects’ Registration Board (ARB) requires practising architects to hold at least £250,000 of such cover.
However, these are just some of the professions for which professional indemnity insurance is a mandatory condition of membership.
There are many other businesses where at least part of the service offered amounts to professional advice or guidance of one kind or another.
Any of these is at risk of human error being made and erroneous or inadequate advice given – professional indemnity insurance helps to protect the business against the financial claims which might arise as a result of such mistakes.
Indeed, there may be many instances where your customers seek your reassurance that you have professional indemnity insurance. This is regarded by many as a measure of your standing and reputation, the care taken by your business to offer its services to the highest professional standards, and the reassurance that your insurance cover is likely to put you in a financial position to correct any errors or mistakes if and when they occur.
In this way, the professional indemnity insurance you hold – and your disclosure of it to potential clients – may help you win those high quality and lucrative contracts for which you might otherwise not have been considered. Disclosure of your professional indemnity cover may often be a condition of your winning local government contracts.
If your business is involved in providing services which require any degree of professional advice or judgment on the part of you or your employees, therefore, you may want to give serious consideration to the protection and benefits of professional indemnity insurance.
