There are certain insurances that all contractors should consider; amongst them is Professional Indemnity (PI) insurance. While this cover is useful to contractors and freelancers across all industries, there are certain professions within the self-employment sphere that have a greater risk of a claim than others. Increasingly, Finance and Business Consultants are choosing to work for themselves, and they may not be aware of the PI risks they face.
From advice that doesn’t pan out or an overran deadline to having client’s sensitive data stolen, there’s a multitude of reasons why a Finance and Business consultant could fall foul of an insurance claim. What can a PI policy protect them from?
What is Professional Indemnity insurance?
You can read in-depth about what Professional Indemnity insurance is here. However, as a quick overview, PI cover offers protection to contractor accountants from a range of scenarios, including:
This is when a mistake is made when servicing the client, to an extent that costs the client money, good reputation or custom. For example, if a finance consultant advised a client to make a large, high-risk investment and it didn't pay off, costing them £10,000s, the client would look to recoup that loss via a PI claim.
Loss of documents or data
The risk of losing documents of data is present for all contracting professions. However, should a business consultant lose strictly confidential revenue figures, for example, the client would probably seek some compensation.
Unintentional breach of copyright or confidentiality
Again, dealing day to day with strictly confidential information hightens the risk of breaching said confidentiality. Even sending an email containing sensitive data to the wrong person could result in a claim.
Defamation and libel
Finance and business consultants may find themselves dealing with large companies or corporate banks, and therefore may be approached by - or even expect to speak with - the press. Should they say something that could be percieved as defamatory, even about a company that isn't their client, they may find themselves subject to a PI claim.
How can Professional Indemnity protect Finance and Business consultants?
As previously mentioned, all contracting professions run the risk of a PI claim so what makes the Finance and Business industries particularly susceptible?
For one, Finance and Business analysts, project managers and consultants handle huge amounts of personal data from project to project; if a mistake is made (a data breach, mishandling client documents, missing deadlines), the results can be far-ranging and costly. For example, you could have an external hard drive, full of clients' financial data, stolen whilst on the train. Should that information be used, you could be faced with having to pay damages along with court costs, which PI insurance would cover.
There’s also a good chance that it’s required as part of a contract. PI is considered an industry formality regardless of your profession – after all, clients want to make sure that it’s up to the contractor to correct any mistakes they make. This means they’re often reluctant to hire contractors that don’t have the correct Professional Indemnity cover and include the insurance as a specification in their contract.
Either way, mistakes happen and it’s best to be prepared. One instance of human error could prove costly, with a claim for an error or omission costing anywhere from a few hundred pounds to hundreds of thousands.
How do I work out how much PI insurance I need?
Imagine the worst mistake you could make in your job. Perhaps you’re a business consultant and advise a client to make certain cuts to redirect budgeting to other campaigns. Your client follows your suggestions and the campaigns don’t work out, causing tens of thousands of pounds of loss.
How much would these problems cost you to set right? How much compensation for loss of business would you have to pay? How much would it cost you in legal fees to defend yourself at trial and how much would your losses amount to while you’re out of work, or even losing work due to a damaged reputation? That total will be significantly lower than what you should take out as Professional Indemnity cover.
With PI insurance, a limit of £1 million indemnity is typically required at the very least, with other common limits sitting at £2 million and £5 million. You’ll easily find cover starting from £250,000 (suitable for start-ups and small businesses) but we strongly advise you over-insure; if the level of cover taken out isn’t sufficient for your requirements, then you’ll be liable to pay the remaining amount.
The main things to consider whilst taking out PI are:
- The size of the client contract: the bigger the client, the higher your PI limit should be.
- Compensation claims: if you’re working with a national client, like the NHS or BBC, compensation claims are likely to be huge. If you usually work with smaller companies (building websites for local retailers, for example), then you probably won’t be faced with such a huge hit.
- Legal costs: again, the bigger the client, the more expensive the trial can become. Consider how deep your client’s pockets are and ask yourself if you can match them.
Additional notes for Finance and Business consultants
No matter how scrupulous you are in your practice, Professional Indemnity not only offers peace of mind but also makes it much easier to attain new clients. Find out about the PI insurance we offer here.