Professional Risks

Business interruption cover can help your business recover from an incident such as a fire, a flood, or a break-in.

Yet it is one thing to have a business interruption policy in place. It is just as important to ensure that your business interruption insurance will give you the cover you need should you ever make a claim on your policy.

According to one report by the Chartered Institute of Loss Adjusters, around 40% of businesses with business interruption policies are underinsured. This means that their policy would not stretch to cover all their expenses if they ever needed to make a claim.

In this post we will explore how you can calculate your business interruption cover to ensure you will have the cover you need when you need it most.

What is Business Interruption Insurance?

Following an unexpected event, such as fire, flood, or theft, you may be forced to temporarily halt or modify your business operations. In this case, business interruption insurance can cover your overheads for as long as it takes for your business to recover.

A good business interruption insurance policy should give you enough cover to restore your business to the exact position it was in before the incident took place. Plus, the policy should provide enough to cover your business throughout the entire recovery period, even if it takes years.

What Does Business Interruption Insurance Cover?

• Loss of Gross Profits – Business interruption insurance may cover for loss of gross profit, which will cover your business’s net profit loss following an insured event. This type of cover is most suitable for businesses with multiple variable costs.
• Loss of Revenue – Alternatively, a business interruption insurance policy may cover for loss of revenue, meaning it will cover your loss of turnover or income following an event. This form of cover is more suitable for businesses with more fixed costs, which must be paid regardless of whether the business is operational.
• Increased Cost of Working (ICOW) – This is cover for any extra investments you may need to make in order to continue operating as normal following an unexpected event. This might include cover for renting alternative working spaces, for hiring temporary staff, and for acquiring new stock or equipment.

How to Calculate Business Interruption Cover

There are two key things to consider when calculating your business interruption cover:

• Sum Insured – This is essentially the settlement you would get if you made a claim on your policy. As we outlined above, your sum insured may be based on your loss of profits, your loss of revenue, or your increased cost of working.
• Maximum Indemnity Period – This is the maximum period for which your business interruption insurance policy will cover you. Think of it as an estimate of the time it would take your business to fully recover from the unplanned event.

How to Calculate Your Sum Insured

Depending on the nature of your business, your sum insured may be based on:

1. Your loss of gross profits or your loss of revenue
2. Your increased cost of working

When it comes to calculating your gross profit or your annual turnover, it is not enough to simply look at figures from previous years. You should also consider possible future trends, along with the potential impact of inflation.

Whether you are calculating your gross profit or your gross revenue, you should always factor in ongoing expenses such as:

• Purchases
• Utility costs
• Staff wages

While accountants may deduct these expenses when calculating gross profit, your business interruption insurance will need to cover you for these expenses, and more.

When calculating your increased cost of working, as well as calculating any additional costs your business may incur, such as through renting alternative premises or hiring temporary staff, you might also consider how you might save on certain expenses throughout your recovery. For instance, if your employees are able to temporarily work from home, you could make savings on ongoing operational costs such as utilities.

How to Calculate Your Maximum Indemnity Period

One of the most common mistakes businesses make when calculating their business interruption cover is in underestimating just how long it would take their business to recover from an unplanned event such as a fire or a flood.

In a business interruption insurance policy, the maximum indemnity period is a hard line: Once you reach your policy’s maximum indemnity period limit, you will cease to receive any further claim payments, even if you have not yet received the maximum amount of your sum insured.

It will likely take you much longer than you think to recover from an event, and you will need your business interruption insurance to cover you for the entirety of your recovery period. So, you should aim to make the maximum indemnity period as long as possible.

Some insurers offer a 12 month indemnity period as standard. But others have started to offer a 24 month indemnity period as standard, so as to help businesses avoid a common underinsurance trap.

We Can Help You Calculate Your Business Interruption Cover

An insurance broker can help you determine what kind of business interruption policy is right for you, based on how your business operates, whether this is a loss of gross profit policy, a loss of revenue policy, or a dedicated ICOW policy. They can then help you calculate your sum insured, based on your past and projected profits and revenue, along with any extra costs or contingencies you may need to consider.

James Hallam is an independent Lloyd’s broker with a dedicated team of experienced insurance professionals who are committed to getting you the cover you need at a price you can afford. We can help you get tailored business interruption insurance while avoiding some common underinsurance pitfalls, so that you will have all the cover you need when you need it most.

Get in touch for a free quote today.

If you offer professional services or advice, then you may face a claim of professional negligence. In this case, professional indemnity insurance can cover any legal fees and compensation payments that may arise as a result of the claim.

To ensure you have the cover you need for any claim you might face, it is vital that you take the time to understand how the professional negligence limitation period might affect claims.

What is Professional Negligence?

A professional negligence claim is an accusation that an individual has failed to carry out their responsibilities to the required professional standard, or that they have somehow breached their duty of care.

For example, a solicitor might offer poor legal advice, leading to financial losses or legal troubles for their client. Or it might transpire that a solicitor has a conflict of interest, which could jeopardise a trial leading to costly delays and other losses for all involved.

If any injured parties decide to make a professional negligence claim against this solicitor, then the solicitor may be held liable for all losses. Dedicated professional indemnity insurance would cover the solicitor for these losses, along with any legal fees that may arise as a result of the claim.

For more information on professional negligence, see our full guide to professional negligence and our guide to professional indemnity insurance for solicitors here.

What Is a Professional Negligence Limitation Period?

The limitation period is a specified timeframe in which individuals can make a negligence claim against a professional.

Standard Limitation Period

Under the Limitation Act 1980, the standard limitation period for most civil claims in England and Wales is six years from the date of the alleged negligent act or omission.

Extended Limitation Period

However, this period may be extended if the negligence is not immediately apparent. Individuals may have three years from the date they became aware of the negligence to make a claim.

In any case, no matter when the negligence or omission was discovered, it is not possible to make a professional negligence claim more than 15 years after the date of the alleged negligent act or omission.

When the Standard Limitation Period May Not Apply

The standard limitation period may not apply to certain situations. For example, in cases of alleged continuous negligence, the limitation period may not commence until the professional ceases to carry out negligent acts.

How Professional Negligence Limitation Periods Affect Insurance

The courts are very strict when it comes to limitation periods. If a claim is issued out of time, then it does not stand a chance, even if the claimant has undeniable proof of a professional’s negligence or omissions.

But at the same time, it is important to ensure that your professional indemnity insurance covers you for any claims that may arise relating to incidents from previous years. Depending on the nature of the claim, claimants may be able to make a professional negligence claim up to 15 years following an alleged incident.

Your professional indemnity insurance policy may specify a retroactive date. This is the date from which your insurer has agreed to cover you. If your policy gives you full retroactive cover, then you will have all the cover you need, even for claims relating to incidents that occurred years ago.

For more about retroactive dates, see our full guide to professional indemnity insurance retroactive dates.

Get Specialist Professional Indemnity Insurance 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.

If you offer professional services and advice, we can advise you on the regulatory requirements concerning professional indemnity insurance, and other forms of cover. We can then help you get the tailored cover you need at a competitive price.

Find out how we can help you today.

In this post we will explain how social engineering attacks work, and discuss how you can protect your systems against this form of cybercrime.

What is Social Engineering?

Social engineering is a type of cyberattack that relies on the psychology of persuasion to trick people into divulging personal information, or accessing malicious links or attachments.

How Does Social Engineering Work?

Many social engineering attacks start with a cybercriminal communicating directly with their intended target. This might be via an email, a text message, or a telephone call.

The cybercriminal will pretend to be from a trusted organisation, or they may even attempt to impersonate a specific person, such as a manager or an IT consultant. In any case, the aim is to trick the target into taking an intended action. This could be to divulge sensitive information, such as bank details or a password, or to click on a malicious link, or to open a malicious email attachment.

What Happens If You Fall Victim to a Social Engineering Attack?

If someone falls for a social engineering attack, then they may themselves become victims of identity theft or other forms of fraud. But in most cases, the cybercriminal’s aim is to breach a secure system. They may target an employee of a company, for example, in order to access the company’s systems or data. Or they may try to gain entry to an employee’s computer in order to hit the whole company with a ransomware attack.

This is why social engineering attacks can be so dangerous. Cybercriminals can target multiple people in an organisation at the same time. And in order for their attack to be successful, it only needs to work against one person.

The Different Types of Social Engineering Attacks

• Phishing – This involves sending a message, such as an email, that claims to be from a trusted individual or organisation. The aim is to trick the recipient into divulging sensitive information, or to take some other desired action, such as clicking a link or opening an attachment.
• Baiting – This might also be referred to as a “watering hole attack”. It involves setting up a fake, malicious website that looks identical to a trusted organisation’s website. Of course, entering your login information on this fake website essentially means that you are sharing your username and password directly with cybercriminals.
• Physical Social Engineering Attacks – Some social engineering attacks may be more personal. You might get a phone call, apparently from your bank, urging you to share certain information so as to correct some kind of bank error. Or, a cybercriminal may post as an IT support worker, in order to gain direct access to a system.

How To Protect Yourself, Your Employees, and Your Business Against Social Engineering

Social engineering attacks are particularly dangerous as they target the weakest link in any cybersecurity system – people. This means that even the most advanced of cybersecurity systems can still be vulnerable to a social engineering attack.

And as cybercriminals are getting smarter and more sophisticated all the time, even the savviest and most experienced of IT professionals may still fall victim to a social engineering ploy.

Constant vigilance is your best defence against social engineering, underpinned by a robust IT security framework.

Essential Cybersecurity Measures Against Social Engineering Attacks

• Staff Training – It is essential that you, and everyone else in your business, understands the risks, and the red flags that could suggest that a message or phone call is not what it seems. This training should be tailored to reflect the unique risks that might exist for your organisation, and the specific forms of attack that cybercriminals may attempt to gain access to your system.
• Password Management – Set clear guidelines on password security, including procedures for when employees should update their passwords, and a strict rule that employees must not share passwords with anyone, at any time.
• Multi–Factor Authentication – This means that people will need more than one security credential in order to access a system. For instance, employees may have to provide one-time passcodes, as well as biometric information, in addition to their passwords.
• Zero Trust Security – This is a cybersecurity framework whereby every user must provide credentials at every point of access, without exception. This, combined with multi-factor authentication, will make it much harder for cybercriminals to access your system, even if their social engineering attacks are successful.

How to Respond To Social Engineering Attacks

Your cybersecurity policy should also outline how you respond to a social engineering attack.

Employees should know who to report to, and what actions they should take, if they suspect they have fallen victim to an attack. This might involve changing their passwords or notifying IT staff, who may be able to take appropriate action before it is too late.

This is one area where cyber insurance can make a huge difference. As well as covering your liabilities during a cyberattack, cyber insurance can also cover certain expenses associated with your response, including the costs of notifying clients or customers whose data may have been compromised by a breach.

Read our full guide to how cyber insurance can help protect your business.

Get Tailored Cyber Insurance For Your Business

James Hallam is an independent Lloyd’s broker with access to a hand-picked selection of A-rated insurance providers. We can help you find the cyber insurance you need at the best possible price.

Get in touch for a free quote today.

Errors and Omissions (E&O) insurance is a specific type of professional indemnity insurance that protects you for certain types of liability claims. In this post we will outline what E&O insurance covers and explore which professions could benefit from this type of insurance.

What is Errors and Omissions (E&O) Insurance?

E&O insurance will cover you for claims involving allegations of errors, omissions, or professional negligence. It will also cover you for claims that your services did not meet your client’s expectations, resulting in financial loss.

If a client makes such a claim against you, E&O insurance can cover your legal fees, along with any settlements or compensation payments that may arise.

What is the Difference Between E&O Insurance and Professional Indemnity Insurance?

Professional liability insurance – or professional indemnity insurance as it is known in the UK – is very similar to E&O insurance. In fact, as many professional indemnity insurance policies cover for errors and omissions, some might even use the terms interchangeably.

Both professional indemnity and E&O policies will cover businesses for financial losses arising from errors, or allegations of negligence. E&O insurance policies, though, may be specifically designed to meet the cover requirements of businesses in the technology, finance, and consultancy sectors.

What Does E&O Insurance Cover?

If you provide consultancy services, or if you manage your clients’ finances, then your clients will put a lot of trust into your insights and expertise. If something goes wrong, and your clients make a financial loss, then they might make a claim against you.

This is where your E&O insurance will prove invaluable. If the client’s claim is successful, then your insurance will cover any settlements or compensation they may be due. But crucially, E&O insurance will also cover your legal fees throughout the proceedings.

Even if the client’s claim is unfounded, and even if the court rules in your favour, legal fees can soon ramp up. E&O insurance will give you peace of mind that everything will be covered in the unlikely event of a liability claim from a dissatisfied client.

What Types of Errors and Omissions Are Covered?

An E&O insurance policy might cover claims involving allegations of:

• Errors or Omissions – As the name suggests, the policy can cover alleged mistakes or oversights that result in financial losses.
• Negligence – This might include allegations of poor work or misrepresentation, or a failure to meet industry standards. In the creative fields, this could also include cases where you inadvertently breach another business’s intellectual property rights.
• Defamation – If you make a statement that damages another individual or business’s reputation.
• Breach of Trust or Contract – If you accidentally break a confidentiality agreement or disclose sensitive information. Or, if you miss deadlines, fail to deliver work, or otherwise breach the terms of your contract.

Who Needs E&O Insurance?

Unlike Professional indemnity insurance, a dedicated E&O insurance policy may be tailored to suit the specific cover and regulatory requirements for businesses in the tech, finance, and consultancy sectors.

This might include any role that involves providing professional services or advice, including:

• Accountants
• Financial advisors
• Software developers
• Estate agents
• Law firms
• Engineers, architects, and surveyors
• Creative roles, including graphic designers and digital marketers

How To Ensure You Have The Right Level of E&O Insurance Cover

Claims involving allegations of errors and omissions can often prove substantial, especially when you factor in the legal costs.

It is essential to ensure that your E&O insurance policy’s specified limits will cover you for all possible claims. The amount of cover you need will depend on your industry and its regulatory requirements, along with the size of your business, and the types of clients you work with.

James Hallam is an independent Lloyd’s broker with a dedicated team of experienced insurance professionals who care about protecting your business. We can help you get exactly the right level of E&O insurance cover you need at a competitive price.

Learn more about our professional risks services, or for more information call us on 0207 977 7842 or email paul.mcnally@jameshallam.co.uk

If you are looking for a professional indemnity insurance policy, then it is vital to ensure that your insurance will cover you for any claims that may be brought against you. The policy’s retroactive date can determine whether or not you are covered for certain claims.

In this post we will explain what a retroactive date is on a professional indemnity insurance policy, and why it matters.

What is a Professional Indemnity Insurance Retroactive Date?

This is the date from which your insurer has agreed to cover you. A professional indemnity insurance policy should specify a retroactive date. Usually, the policy will cover you from the date you took out the insurance. However, some policies may specify an earlier retroactive date, or a later one.

How Does Your Retroactive Date Affect Claims?

Your policy will only cover you for claims arising from work you have undertaken, or advice you have given, after this specified retroactive date. So, when you are taking out a professional indemnity policy, it is crucial to ensure the retroactive date either includes the date you started your business, or the date on which you started a project or contract which may arise in a claim.

Different Types of Retroactive Dates on Professional Indemnity Insurance Policies

Your insurer may refer to your retroactive date in a number of ways:

• Unlimited Retroactivity – This means that your policy will give you full retroactive cover. You will have cover for any claim you report during your policy period, even if the claim relates to work you carried out, or advice you gave, before you took out the policy. Unlimited retroactivity cover may also be referred to on your policy as “retroactive date: none”.
• Specified Retroactive Date – Alternatively, your policy may include a specific retroactive date. As we mentioned above, this means you will only have cover for claims arising from work you have undertaken, or advice you have given, after this specified date. You will not be covered for any work you undertook before this date.
• Retroactive Date Inception (RDI) – This simply means that your cover will commence from the date you took out the policy. You will not be covered for any work you began before you took out the policy.

Why Retroactive Dates Matter For New or When Switching Policies

You should be able to rely on your professional indemnity insurance policy to cover you for any claim your clients may make against you. A specified retroactive date, or an RDI policy, will be fine if your business is just starting out, or if you are getting cover for a specific contract or project.

However, if you are switching policies, or if you are purchasing PI insurance for the first time, then it is important to ensure that there are no gaps in your cover.

Alternative Retroactive Clause, and Avoiding Gaps in PI Cover

Some insurers are a bit more specific with their retroactive date clauses. They may specify that the retroactive date is the earlier date of:

1. The date you first purchased this specific policy.
2. The retroactive date specified on the PI insurance policy you had previous to taking out this specific policy.

In short, this means that the insurer expects you to provide evidence that you had professional indemnity insurance in place since you started trading. If you cannot provide this evidence, then your retroactive date will simply be the date you took out insurance from your current provider. This means they will not cover you for any claims arising from before this policy period.

You can contact your previous providers for evidence of your previous policies. But if this is your first PI policy, or if there are gaps in your cover, you can ask your current provider for an earlier retroactive date, or for unlimited retroactivity. Just bear in mind that this may result in higher premiums, and there may also be a one-off premium payment for this policy adjustment.

We Can Help You Ensure Your PI Insurance Covers You For All Claims

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

Whether you are just starting out, or you are looking to switch providers, we can help you ensure that your PI insurance covers you for any claim that may be made against you, even if the claim is relating to work you commenced before you took out the insurance.

Learn more about our professional risks insurance services.