Professional Risks

How Much Professional Indemnity Cover Do I Need?
How Much Professional Indemnity Cover Do I Need? 500 284 James Hallam

Professional indemnity insurance can cover your business for claims of negligence, or other professional mistakes. It is essential for protecting your business against both financial and reputational damages. But how much professional indemnity cover do you need?

In this post we will discuss some of the factors to consider that will help you determine how much professional indemnity cover is right for you.

What Happens If You Do Not Have Ethe Right Level of Professional Indemnity Cover?

If you do not have enough cover, then you may face financial or legal troubles should anyone ever make a claim against you. But at the same time, you do not want to spend too much on a level of professional indemnity cover you may not ever need.

Factors that Determine How Much Professional Indemnity Cover You Will Need

  • Your business. The higher the value of your contacts, the more professional indemnity cover you will need. While a larger client base can increase the size of claims, it is not necessarily the case that bigger businesses will need more cover than smaller businesses. A solo freelance financial consultant may need more cover than a large team operating in a relatively low-risk industry.
  • Your industry. Some industries are riskier than others, which means that the cost of claims can be much higher if something goes wrong. In certain industries, such as healthcare and finance, there may also be regulatory requirements determining the level of professional indemnity cover you need.
  • Your risk profile and claims history. Your business’s risk profile can push up the cost of claims. Similarly, a history of claims can increase the value of subsequent claims, which may mean you will need a higher level of professional indemnity cover.

How to Calculate How Much Professional Indemnity Cover You Need

  • Perform a thorough risk assessment for your business. Pay particular attention to how your services might affect your clients, and on the sort of financial or reputational losses they could face if something goes wrong.
  • Refer to the regulatory requirements for your industry. Do they specify any coverage levels?
  • Similarly, check your client contracts. Some may require you to have a certain level of professional indemnity cover in place.
  • Research the average costs of claims in your sector, and the average level of professional indemnity cover. Small businesses and independent freelancers may need between £500,000 and £1 million professional indemnity cover. But if you work in the legal or financial services, the stakes for your clients will be much higher, so you will need a lot more cover. Potentially, you may need up to £10 million.

We Can Help You Work Out How Much Professional Indemnity Cover You Need

If you are still not sure how much professional indemnity cover you need, we are here to help.

James Hallam is an independent Lloyd’s broker with a dedicated team of experienced insurance professionals who care about protecting your business.

We will take the time to get to know you and your business, so that we can advise you on your specific business insurance and regulatory requirements. We can then help you get the right level of professional indemnity insurance for your business – enough to give you full cover should anything go wrong, but not so much that you end up paying excessively for cover you do not need.

Learn more about our professional risks insurance services.

 

 

Crime Insurance vs. Fidelity Bonds – What’s the Difference?
Crime Insurance vs. Fidelity Bonds – What’s the Difference? 500 334 James Hallam

All businesses and professionals should get insurance cover for any potential losses that may arise from criminal activity. In this post we will outline the differences between two key forms of cover: crime insurance, and fidelity bonds.

What are Fidelity Bonds?

Fidelity bonds may also be referred to as employee dishonesty insurance. Fidelity bonds can cover your business for any losses that may arise as a result of fraudulent or dishonest acts committed by your employees.

For example, if an employee embezzles or steals money from the business, such as through credit fraud or forged cheques, your fidelity bonds can cover your financial losses up to your pre-agreed cover limit.

What is Crime Insurance?

While fidelity bonds offer specific cover for employee dishonesty, crime insurance can provide much broader cover. Like fidelity bonds, crime insurance can cover your business for losses arising from employee fraud. However, a crime insurance policy can provide additional cover for losses that result from third party criminal activity, including robberies and forgeries.

Crime insurance can also provide cover for losses resulting from cyber breaches and data theft – though a dedicated cyber insurance policy can offer the broadest cover here.

The Key Differences Between Fidelity Bonds and Crime Insurance

  • Fidelity bonds offer narrow, specific cover for employee dishonesty. Crime insurance provides much broader cover for losses stemming from a wide variety of criminal activity – including criminal acts committed by third parties.
  • Fidelity bonds may not cover all losses that arise from employee activity. The insurance may only extend to specified acts of employee dishonesty. This means you will not be covered for losses stemming from poor sales performance, or from business risks that do not pay off.
  • In certain regulated sectors, there may be a legal requirement to put fidelity bonds cover in place, as it can provide such a strong deterrent against insider fraud.
  • There are often strict reporting requirements and timelines for claims made on fidelity bonds. Crime insurance policies, though, can be a lot more flexible. You may, for example, be able to choose between claims-made or occurrence-based policies, which can result in a more streamlined claims processed.

To sum up, crime insurance policies may include the employee dishonesty cover you would get from fidelity bonds, but fidelity bonds will not provide the broad cover you might get from a crime insurance policy.

Crime Insurance or Fidelity Bonds – Which is Right For My Business?

Some people may use the terms “fidelity bonds” and “crime insurance” interchangeably. But as we have seen, these are two different insurance products offering different levels of cover for your business.

So, which form of cover is right for your business?

You could tailor your crime insurance policy to include some cover for employee dishonesty. However, fidelity bonds can be particularly useful for businesses that offer certain financial and professional services.

If your business handles large amounts of cash, or if you deal with sensitive financial information, you may face an increased risk of insider fraud. In this case, you may need to get dedicated employee dishonesty cover in addition to your broad crime insurance cover.

At James Hallam, We Can Help Your Business Get The Cover You Need

James Hallam is an independent Lloyd’s broker with a dedicated team of experienced insurance professionals who care about protecting your business.

We will take the time to get to know you and your business, so that we can advise you on your specific business insurance requirements.  can advise you on your business insurance and regulatory requirements. We can then help you get the cover you need for the crime risks your business is facing, whether this means a broad crime insurance policy, or a more specific fidelity bonds policy.

Learn more about our professional risks insurance services.

 

What Does D&O Insurance Cover?
What Does D&O Insurance Cover? 500 334 James Hallam

Directors and Officers insurance – also known as D&O insurance – is specialist cover for any claims made against your business’s directors and officers.

What Does Directors and Officers Insurance Cover?

D&O insurance covers legal fees, and any compensation that may be due, for claims made against directors and officers for alleged wrongful acts.

This might include allegations of:

  • Neglect
  • Error
  • Trading offences
  • Misleading statements
  • Breach of trust or duty
  • Data breaches

Real World Examples of D&O Claims

Below are some examples of the sort of situations that might result in allegations of wrongdoing, which would necessitate D&O insurance cover for legal fees and compensation:

Unfair dismissal
An employee may disagree with a dismissal, and may take legal action against the business as a result. In 2016, the CEO of the NYTimes faced a multimillion-dollar class action lawsuit from a number of employees for alleged discriminatory hiring practices.

Breach of trust
If a business’s shareholders or investors believe that a director or officer is not being transparent, they may take legal action to recover their investment. In 2016, the GoPro management faced legal action from their investors, who alleged that the company was misleading them about certain sales figures.

Misappropriation of funds
An unspecified nonprofit organisation received a large donation from a private donor. This donor expected the nonprofit to use the funds to aid impoverished children. Instead, they used the investment to expand their premises. The donor took legal action against the nonprofit’s director and trustees for misappropriation of funds.

Fraud
For years, Enron’s directors and officers engaged in fraudulent accounting practices, which ultimately bankrupted the company. Following extensive lawsuits against the company’s executives, shareholders ultimately received over $7 billion in settlements.

Do I Need D&O Insurance?

If your business has directors and officers, then they may be held personally liable for any alleged wrongdoing. As we have seen, these allegations can come from a range of sources, including shareholders, investors, regulators, employees, and other third parties.

Plus, many D&O insurance claims are for alleged wrongful acts. Even if the director or officer feels that they have acted honestly, and in their company’s best interests, they may still face legal action.

D&O insurance can cover all of the legal fees associated with these claims, along with any compensation that might be due. Without D&O insurance, your business’s directors and officers may be personally liable for covering these expenses. This could compromise their position in the company, which may jeopardise your business as a whole.

What is Not Covered By a D&O Insurance Policy?

Some D&O insurance policies may include cover for employment practices liability as standard. Though some insurers will offer it as an optional extra. This is dedicated cover for claims from your employees for discrimination, such as sexual harassment, unfair dismissal, or failure to promote.

D&O insurance will cover claims made against individual directors and officers for alleged wrongful acts. It will not cover claims made against your business as a whole. For this, you will need additional forms of business insurance, such as employer’s liability cover, public liability cover, or product liability cover.

Dedicated Directors & Officers Insurance Services From James Hallam

James Hallam is an independent Lloyd’s broker with a dedicated team of experienced insurance professionals who care about protecting your business.

We can advise you on your business insurance requirements, and help you find a D&O insurance solution that gives you all the cover you need at the best price.

Learn more about our professional risks insurance services.

 

Why do I need Directors and Officers Liability Insurance?
Why do I need Directors and Officers Liability Insurance? 1920 1280 James Hallam

Directors and Officers have a significant role in helping to keep businesses running smoothly, but mistakes can happen. Directors and Officers Liability insurance applies to anyone who serves as a director or officer of a for-profit business or nonprofit organization. In the event that the individual within the business falls short of their obligations, this insurance is intended to protect them from personal losses if they are sued as a result. It can also cover the legal fees and other professional costs of defending yourself against such claims.

Who can sue?

  • The Company
  • Shareholders
  • Third Parties
  • Employees
  • Creditors
  • Regulatory Bodies
  • Competitors

Directors and officers can be sued for a variety of reasons, including:

  • Misrepresentation of company assets
  • Misuse of company funds
  • Improper disclosure
  • Failure to comply with workplace laws
  • Negligent
  • Theft of intellectual property or poaching of competitor’s customers
  • Lack of corporate governance

What does Directors and Officers Liability insurance policy cover?

The purpose is to provide protection for the directors and officers of the company for any alleged wrongful acts that are committed in the course of their duties. A Directors and Officers Liability Insurance Policy is comprised of two sections; officers and directors liability which pays any loss they are liable to pay and which arises from their having committed a wrongful act while acting as such. The second section refers to company reimbursement, if the company is legally liable to indemnify its directors and officers for their actions, this section will reimburse the company in respect of such liability.

Why does my business need to purchase D&O insurance cover?

Any business with a corporate board should consider investing in D&O insurance. While you may not be legally required to have D&O insurance if you are alleged to have acted wrongfully, you could face claims for compensation or criminal proceedings. Regardless of the size of your company, directors and officers can still be personally sued over their management of company affairs. Smaller businesses with fewer assets may need as much protection as larger corporations with higher revenues. There are so many decisions to be made for your business as we navigate through these uncertain times and whilst there is a wealth of professional advice out there, this won’t necessarily prevent allegations being brought against you or your business. It is for this reason that many company directors tend to have D&O cover in place.

D&O Insurers are aware that the current crisis has resulted in more claims, which is causing a hardening market. This means that insurers are likely to revise the D&O cover they provide and increase their premiums. This trend is probably going to continue for the foreseeable future so purchasing a policy now makes sense, even if your other insurance policies are not yet due for renewal.

Reduce Data Exposure to Cyber Threats
Reduce Data Exposure to Cyber Threats 1920 1280 James Hallam

In our current world, protection against cybercrime is needed more than ever. Cyber criminals will be using COVID-19 to increase their activities to attack individuals and organisations. The National Cyber Security Centre has reported a rise in online scams exploiting the pandemic with the aim of obtain money from victims. It is critical for organisations to re-assess their data protection practices to cyber security and help protect themselves from experiencing data exposure and breaching GDPR.

Why is cyber security important?

• Damage to IT systems
• Loss or impairment of critical business data
• Loss or compromise of customer data
• Loss of use of customer facing websites
• Damage to brand or reputation and loss of public trust.

The increase in the number of individuals working from home poses even more risk to businesses as they become more reliant on their IT systems and employees often working on their own devices.

What steps can I take to be prepared for a cyber attack?

1. Protect data using strong passwords and encryption. Make sure you avoid using predictable passwords and provide secure storage for passwords.

2. Secure your computer, wireless network and mobile device. Often cyber criminals will gain entry by exploiting your software. To prevent this, ensure you keep all your applications and operating systems up to date.

3. Provide training against cyber treats. Your employees should know your cyber security policies and know how to report suspicious activity. Providing training on these topics should assist employees in reducing the risk of data exposure.

4. Consider having an offline back up. Back up your data regularly in more than one place and do not leave your backup connected to your device when not in use.

5. Understand phishing threats and how to respond. Phishing is a method cyber criminals use to gather information. They often send victims emails with links that will direct you to fraudulent websites, asking you to provide sensitive information. Providing real life examples through training can help employees understand what to look for and how to best deal with them.

6. Create an incident response plan. While cyber security programmes secure an organisations digital assets, an incident response plan provide steps in case a cyber attacks occurs. This will allow organisations to notify impact customers quickly and limit financial and reputational damages.

7. Use multi factor authentication. This adds a layer of security to protect against compromised credentials. Users must confirm their identity by providing extra information when attempting to access networks, e.g. phone number or security code.

What if my business becomes victim to a cyber attack?

Taking these steps can reduce the chances of you becoming a victim of a cyber-attack but it is impossible to eliminate the risk entirely. Cyber Insurance can help your business deal with and recover from any cyber attacks.

Start Typing