All business owners who provide services or advice ‒ or both ‒ need to protect themselves in case their customers are unhappy with the result.
This can occur when you or your staff make a mistake or even when you haven’t but your client feels your delivery of service falls short. If a customer makes a claim on your business the costs can be significant: not just financially but also in terms of your name, brand and reputation.
You need to be prepared for this eventuality because even the most skilled experts and diligent staff can slip up sometimes, and customers may make allegations of negligence, claims of malpractice or professional misconduct.
How PI protects you and your business
Professional indemnity, or PI insurance, covers the costs if you do find yourself on the wrong end of a damages claim. You have to be able to
- pay the legal costs of defending the action against your business
- pay a settlement (and sometimes it can be more expedient to bring the matter to a conclusion out of court than to fight a legal case).
You don’t want to expose your business’s or your own assets to these exposures. Some damages claims cases can run into millions of dollars.
Who needs PI?
Don’t be misled into thinking the term ‘professional’ only applies to white-collar occupations; anyone who the customer relies on for their expertise needs PI cover. You could be a surveyor, engineer or consultant, or a naturopath, fitness instructor or real estate agent. There are a multitude of occupations that involve providing services or advice.
Some occupations require PI cover to meet regulatory requirements; for others, such as hairdressing, it is optional.
How do you know if your PI policy is right for your business?
Depending on your business type, size and industry, your PI cover needs to be fit for purpose and meet certain criteria. These include
- adequacy: the policy should completely cover all the business’s entities and personnel
- compliance: if you operate in an industry that specifies a certain level of professional indemnity cover, you need to be sure that you meet the requirement
- clarity: you also need to be clear about the excess you will have to pay in the case of a claim.
This is where having an insurance broker’s guidance can be invaluable. Getting a broker’s help with obtaining PI insurance has other advantages too, such as
- money saving: through their contacts and knowledge of the market a broker can obtain competitive pricing
- paperwork: a broker can also guide you in preparing duty of disclosure information about your business
- relevance: a broker can review and update your policy to reflect any changes within your business when it comes time to renew your cover.
Our experts at Gallagher can also help by providing advice about how to mitigate your risks and minimise the financial impact of a damages claim against your business.
Professional indemnity is just one aspect of the comprehensive business insurance cover we can tailor to your individual requirements for all your operation’s needs.
Want to know more about protecting your business? Get in touch with one of our insurance experts.