Professional Indemnity Insurance (PI Insurance) is essentially an insurance product designed for professional firms and people which covers them in the event of certain errors made during the course of their business activities.
In an increasingly litigious environment, you’ll need professional indemnity insurance to protect your business against claims made by a third party as a result of an error, omission or negligent advice.
In a changing economic climate which features rapid technological advancement and increased regulatory pressures, more and more businesses are finding themselves at risk of lawsuits due to perceived, or actual, negligence or errors. They may also need to satisfy regulatory and client-imposed contractual requirements.
Whilst this insurance is not legally compulsory, it allows companies and their professional people to work without fear that they will be sued by a client or a third party for problems that occur as a result of their professional activities. It allows professionals to carry out their work with greater confidence and piece of mind.
Nowadays, the increasing reliance of businesses on the contracted services provided by many occupations has vastly increased the scope of the term ‘professional’, and a professional is regarded as any person or firm offering specialist advice or services. The risks are as significant as ever and mistakes can still lose a professional their business and their reputation without adequate professional indemnity insurance.
The cost of a claim against you or your business could run into many thousands of pounds – it could literally “take your business under” – and that’s not accounting for the time and effort required to fight any such allegations. A robust PI policy will cover all costs of the claim (legal fees etc) and also allow you to detach yourself somewhat from the claim itself and allow your insurer to assist.
The rise in the “compensation culture” in the UK means it is more likely than ever that a claim against you might arise if a client thought you had been negligent in any way, deliberate or wholly accidental.
Without professional indemnity cover in place, you’d have to defend any allegations of mistakes out of your own finances and cover the settlement figure if you lost the case – which is why it’s typically regarded as essential business insurance if you give professional advice to clients as a sole trader or business.
Examples include:
- incorrect advice
- professional negligence
- incorrect designs
- poor or misleading marketing & advertising
- sub-standard services
- loss of documents or data
- unintentional breach of confidentiality or copyright
These mistakes can cost clients time and money, and they may choose to take legal action against you to recover their costs.
Examples of professionals that might need PI Cover:
- Business and management consultants
- Accountants, surveyors, architects
- Lawyers
- IT contractors and consultants
- Private tutors, fitness trainers
- Technical and engineering contractors and architects
- Marketing professionals
