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Start ups at risk from lack of Professional Indemnity cover

News >> Professional Indemnity

Many new consultants appear to delay purchasing professional indemnity (PI) insurance for an average of six months after setting up their business, according to recent research.

The survey also found that 39% of respondents did not purchase PI cover until at least three months after they had been in business. A further 20% waited two or more years until they purchased the insurance. Many that take cover only do it because of contractual requirements with certain clients that include these arrangements as part of their own Risk Management process.

 

According to the research, half of the respondents recognise the importance of professional indemnity insurance by purchasing cover immediately. Accountants however proved themselves the most keen to purchase cover with 90% buying PI insurance straight away and the remaining 10% purchasing it within six months. However those most at risk from delaying their purchase of PI cover were companies involved with design, engineering or marketing and communications.

 

It does appear that there is a big difference between industries, with those in more regulated sectors such as accountancy and consultancy likely to purchase professional indemnity insurance from the start. However, the more creative sectors such as marketing and design appear to delay their purchase, which places them at higher risk in the event of a client dispute.

 

It is disappointingthat many businesses will wait some time until they have been in business for some time, before obtaining cover. It is of particular concern that one in five respondents had been in business for two years or more before purchasing professional indemnity insurance. During this time they have been exposed to a considerable risk and will continue to do so if any cover they arrange has a retroactive date from inception of the new policy. The past work prior to that date will not be covered.

 

Then what do we do about it?

  • All Professionals about to start their own business need to be aware of the risks they take should they make an error or omission in their profession.
  • It is up to Insurance Brokers such as myself to clearly inform as many as people about the risks professionals face.
  • Businesses engaging un-insured professionals under contract for services need to be aware that the consultant is unlikely to have the resources to meet any claim against them and are likely to declare Bankruptcy.
  • Un-insured professionals need to be aware that they can lose all their personal assets, including their home and if they still become a bankrupt will find it a huge stigma and barrier to starting any new businesses.
  • If cost is a barrier, then utilise premium funding and spread the payments over the course of the year.
  • Professionals should be aware, this is their most important insurance cover. Why be in business without this basic protection?

 

So any “Start Up” needs to plan their business. Where they are likely to get business? What marketing and publicity they need? What networks they can draw upon? Also what Risk Management they have. And for a Professional person, any Risk Management programme should include Professional Indemnity cover.

 

If you need help on this, call CPR Insurance Services, experts who will save you!

 



 

  

Last changed: Mar 12 2012 at 12:50 PM

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