In the course of business, directors and officers can be held personally liable via civil, criminal or regulatory proceedings should they fall short of their obligations, and personal assets – such as cash, property and pensions – could all be at risk.
In recent years, there has been a trend towards individual accountability, with regulators turning their gaze towards company individuals; however, many at SME-level remain unaware of the extent of their liabilities.
“SMEs don’t have the same sophisticated level of understanding of what their responsibilities are in line with the various legislations that are imposed on them as large Plcs would,” Darrel McCartan, UK Market Manager for Financial Lines at Zurich, told Insurance Business.
As well as increased scrutiny from regulators, who McCartan described as having “upped the ante,” directors and officers face a broad range of exposures, and could see claims come in from almost anywhere – including customers, shareholders, competitors, or even their own organisation.
“The majority of the claims that we see at this level aren’t for huge amounts, but an SME could easily end up having to spend tens of thousands of pounds defending itself, even from something it didn’t do,” McCartan explained. “If someone wants to take an action against you, even where you haven’t done anything wrong, the D&O coverage will pick it up and pay your defence costs and damages if the case doesn’t go your way.”
For smaller firms, who typically have fewer resources to defend allegations or fund potential fines, penalties or awards for damages, D&O is becoming an increasingly important cover for businesses – and should be front and centre of brokers’ conversations with clients.
“I think every broker should include a D&O option with their renewal package to their clients. It should be almost mandatory,” McCartan commented.
At SME-level, D&O cover is typically broader than it would be for a Plc, he went on to say, adding that Zurich’s offering can be extended to offer protection against a wide range of risks associated with running a business.
“If brokers are trained up and they embrace what D&O can do for their clients, then they can sell it to them, and it can provide the client with the service that they need and the cover that they deserve,” McCartan said.
He added: “It’s also not just the SMEs that are open to exposure here, but the brokers themselves too: one of the highest increases we have seen in claims against brokers is not offering their clients a D&O option at the new business or renewal stage.”
Zurich’s D&O/corporate liability offering for SMEs is available to small businesses with up to £200,000,000 turnover and can be accessed by brokers via ZTrade. The modular policy can be extended beyond its core coverage to offer protection against employment practices liability, pensions trustees liability, employee dishonesty and crime.
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