Are SMEs underinsured when it comes to professional indemnity?

Just one complex claim could threaten the existence of an SME business, says Zurich

Are SMEs underinsured when it comes to professional indemnity?


By Lucy Hook

In an increasingly litigious world, businesses must be prepared when it comes to the potential of facing professional indemnity (PI) claims – which can be costly and time-consuming. For smaller companies with fewer resources, it could take just one complex issue to threaten the very existence of a business. 

PI cover will protect SMEs against claims for financial loss arising out of negligent advice, designs, or specifications given in the course of their business. While some professions are obliged to take out PI cover as part of their industry body’s regulatory requirements, many aren’t – and those that don’t take out insurance risk leaving themselves exposed.

“There’s often some confusion over whether a public liability policy might cover professional indemnity exposures – which it doesn’t,” Jim Gaskin, financial lines manager at Zurich UK, told Insurance Business.

When it comes to underinsurance among smaller businesses, cost can also be an important factor, as SMEs are likely to be facing rising costs in many areas.

“They either don’t recognise that they have an exposure, or perhaps they think it’s a one in a thousand-year event and it’s not worth the cost,” Gaskin continued.

“For those individuals, particularly one-man operations or very small businesses, they may not recognise that they have this threat, because it hasn’t yet happened to them. But it only takes one complex issue to take up all the management time for a small SME – which typically doesn’t have sophisticated resources, or a legal and compliance department like large companies have – and that can really threaten the business.”

Without PI cover in place, companies are left to handle claims on their own – and even where allegations are unfounded, the defence process can be lengthy and draining on resources. To help ensure that clients are adequately protected, brokers and insurers should encourage clients to weigh up the potential cost of facing a claim, versus the relatively low cost of a PI policy – for which premiums have come down considerably in recent years due to increased competition.

Zurich offers one of the wider PI coverages in the market, but is also committed to regularly reviewing pricing – a crucial factor for SME clients.

“There’s always that balance when it comes to making sure you’re charging the right premiums to cover your expected losses,” Gaskin explained, “but at the same time, we recognise that we need to be price competitive in the market, so we are constantly reviewing both coverage and pricing.”

Read the company's quick guide to Professional Indemnity here.

Brokers can quote, buy and renew SME insurance through Zurich’s online ‘ZTrade’ platform. This platform allows customers to protect their business through the expertise of a broker and the ease of an online transaction.
Brokers can access documentation online and email it directly to the customer within minutes of logging on to the system, Mike Coyne, senior financial lines underwriter at the insurer, explained.

“The full-service platform means brokers can bind cover and administer adjustments and renewals all in one place, saving considerably on admin time,” he concluded.

Log in or register your interest in Ztrade.

Keep up with the latest news and events

Join our mailing list, it’s free!