Only a third of small businesses have professional indemnity insurance
Just over a third of UK small businesses and sole traders are protected by professional indemnity insurance, a new survey suggests.
The poll, by construction and small business insurance specialist constructaquote.com, quizzed more than 2,000 small business owners on whether they currently had professional indemnity, or PI insurance. 64% said they didn’t and only 36% said they did.
Professional indemnity, sometimes known as professional liability insurance, is designed to cover the legal costs and expenses incurred in your defence, as well as any costs or damages awarded, if a client alleges they have lost money due to you providing inadequate or incorrect advice or services.
Some professions, such as financial advisors and business consultants, take out PI insurance as a matter of course and in some cases it may be part of their respective industry body’s regulatory requirements. Many different professionals could benefit from the protection afforded however, from fitness professionals such as personal trainers to recruitment agencies and IT contractors.
PI could provide protection against claims arising from cases involving negligence or a breach of professional duty, transmission of a computer virus, defamation, and infringement of intellectual property rights or other civil liabilities. Without adequate cover, a business could be held liable for substantial costs and damages, which could even lead to company administration.
The top 5 sectors of those small businesses without professional indemnity were building and construction (13%), engineering (11%), property (9%), IT (9%) and health & fitness (8%).
When asked why they didn’t have the insurance in place, the top reasons given were ‘I don’t feel as though I’ll ever require it’ (39%), ‘I don’t know enough about what the insurance policy would guarantee me’ (33%) and ‘I don’t think I can find the budget to pay for it’ (12%).
Many SMEs may also be under-insured in other areas. Recent floods have led to reports that up to 60% of SMEs in the UK may be under-insured against dangers from the elements while an increasing switch from brokers to purchasing online insurance may leave many without personally tailored policies.
By Phil Smith