SME

directors

10 Reasons Why Your Business Needs Directors & Officers (D&O) Insurance
10 Reasons Why Your Business Needs Directors & Officers (D&O) Insurance 750 422 James Hallam

What is Directors and Officers insurance?

Directors and Officers (D&O) insurance is a vital safeguard for businesses, protecting key decision-makers from personal liability in the event of legal claims related to their roles. In the UK, the responsibilities of directors and officers have increased significantly due to ever-evolving corporate governance standards and stricter regulations. Without D&O insurance, your business and its leaders may be exposed to serious financial and legal risks.

What Does D&O Insurance Cover?

D&O insurance provides essential protection, covering legal defence costs, settlements, and compensation in a wide range of scenarios. Ultimately, D&O insurance is not just a safety net—it’s a vital tool for protecting the individuals who make the critical decisions that drive your business forward. By investing in a D&O policy, you safeguard your leadership team, your business, and your future.

Who Needs D&O Insurance?

Whether your business is a start-up, an established corporation, or a non-profit, having the right D&O policy in place can help you attract top talent, navigate regulatory challenges, and focus on growth without fear of personal liability.

Here are ten compelling reasons why every UK business should consider D&O insurance.

  1. Protect your Business from Personal Liability

The primary reason to invest in D&O insurance is to shield directors and officers from personal liability. In the UK, if a director or officer is accused of wrongful acts such as breach of duty, mismanagement, or negligence, they can be personally sued. Unlike the business itself, which may have its own insurance, individuals in these roles are vulnerable to legal claims that could threaten their personal finances. D&O insurance provides protection by covering the legal costs and damages, ensuring that directors and officers aren’t held personally responsible for costs related to decisions made in good faith.

  1. Defence Against Claims by Employees

Employees can file claims against directors and officers for a variety of reasons, including unfair dismissal, harassment, discrimination, and breach of employment contract. Such cases can be highly damaging, both financially and reputationally. Even if a claim is unfounded, the legal fees alone can be substantial. D&O insurance covers legal defence costs, settlements, and compensation in employee-related disputes, protecting your leadership team from potentially crippling financial burdens.

  1. Regulatory Investigations and Fines

The UK has strict regulatory bodies, including the Financial Conduct Authority (FCA) and the Health and Safety Executive (HSE), which hold businesses and their leaders to high standards. Regulatory investigations can be complex, time-consuming, and expensive. If your business or its directors are accused of breaching regulations, D&O insurance can cover legal expenses and fines associated with regulatory investigations, reducing the financial strain on your business.

  1. Investor and Shareholder Lawsuits

Shareholders or investors may file lawsuits against directors and officers if they believe mismanagement has led to financial loss or a decline in the value of their shares. In the UK, these types of claims are becoming more common, particularly for public companies. A D&O policy covers legal defence and any potential settlements, ensuring that the personal finances of directors and officers are protected while enabling the company to manage the situation effectively.

  1. Mergers and Acquisitions (M&A) Risk

Mergers and acquisitions can be exciting growth opportunities for businesses, but they also bring significant legal risks. During an M&A process, decisions made by directors and officers are often scrutinised by shareholders, regulators, and even the media. If stakeholders feel that they were misled or that the deal wasn’t in their best interests, lawsuits can follow. D&O insurance is essential for protecting directors and officers involved in these high-stakes decisions, ensuring they’re covered in the event of legal disputes during or after the transaction.

  1. Cybersecurity and Data Breach Liability

With the rise of cybercrime and the increasing importance of data protection regulations like the UK’s Data Protection Act 2018 (which incorporates the principles of GDPR), directors and officers are increasingly being held accountable for cybersecurity failures. If your business suffers a data breach, directors could be personally sued for failing to implement adequate safeguards. D&O insurance can cover legal costs associated with such claims, helping to mitigate the financial fallout from a data breach.

  1. Insolvency and Bankruptcy Claims

If a business becomes insolvent or bankrupt, directors may be personally liable for claims of wrongful trading or mismanagement leading up to the financial collapse. In the UK, wrongful trading occurs when directors allow a company to continue operating while knowing it is insolvent. D&O insurance offers crucial protection by covering legal costs and potential damages arising from such claims, helping directors navigate the challenging process of insolvency without putting their personal assets at risk.

  1. Attract and Retain Top Talent

Top talent is often drawn to businesses that offer robust protection for their leaders. By providing D&O insurance, your business can demonstrate its commitment to safeguarding directors and officers from personal risk. This level of protection can be a key factor in attracting experienced professionals to your leadership team. Additionally, offering D&O insurance can help retain top talent by giving directors and officers peace of mind that they are protected in the event of a legal claim or regulatory investigation.

  1. Protection for Non-Profit Organisations

D&O insurance isn’t just for large corporations; it’s also crucial for non-profit organisations, charities, and community groups. While these organisations may not have the same level of financial exposure as big businesses, directors and officers are still responsible for managing the organisation’s finances, governance, and regulatory compliance. Without D&O insurance, directors and officers of non-profits are at risk of personal liability if they are accused of mismanagement or negligence. This protection is especially important given the limited financial resources many non-profits have at their disposal to cover legal costs.

  1. Claims Can Arise Even After Resignation

One often-overlooked benefit of D&O insurance is its ability to provide cover for claims that arise after a director or officer has resigned from their position. Legal actions can be filed long after an individual has stepped down, particularly if there are allegations of wrongful acts committed during their tenure. D&O insurance ensures that former directors and officers remain protected, giving them the confidence to make decisions without fear of lingering liability.

Why is Directors and Offices Insurance so Important?

In today’s complex business environment, the risks faced by directors and officers are higher than ever. From regulatory scrutiny and employee claims to cyberattacks and shareholder lawsuits, the potential for legal action is vast. Without D&O insurance, directors and officers are left exposed to personal liability, putting their financial security on the line for decisions made in the course of their duties.

What’s the Difference Between D&O Insurance and Management Liability Insurance?

In the UK, Directors and Officers (D&O) insurance and Management Liability Insurance (MLI) are similar but differ in scope. As detailed above, D&O insurance protects directors and officers against personal liability for claims made against them while performing their duties. In contrast, MLI is broader, covering not only directors and officers but also the company and senior management. It includes risks like employment practices liability (e.g., discrimination or wrongful termination). While D&O focuses on individual liability, MLI covers both individuals and the business entity against management-related risks. 

Talk to Us About D&O Insurance Today

Get in touch for a free quote today.

small business

How Much Does Small Business Insurance Cost?
How Much Does Small Business Insurance Cost? 900 507 James Hallam

In this post we will discuss how much small business insurance costs in 2024. We will explore some of the factors that affect the cost of cover, along with some strategies for reducing your premiums.

Is Business Insurance Getting More Expensive?

A recent report by the Federation of Small Businesses revealed that around 60% of small businesses had seen their insurance premiums rise in the past year. What’s more, 52% of these businesses have seen a rise of 11% or more.

There are many reasons for the rising costs of small business insurance. Enforced government lockdowns during the pandemic forced many small businesses to make business interruption claims, which may have raised the cost of cover for all. Plus, the UK’s been hit by soaring inflation in recent years, which for many will have made a difficult situation even worse.

What Can Affect The Price of Small Business Insurance?

A number of things can affect the price of your small business insurance:

  • The size of your business. Generally speaking, the larger your workforce, the more you’ll pay for cover. However, insurers sometimes offer group insurance policies to cover employees who face similar risk profiles, which means that some larger businesses may be able to get a discount on their cover.
  • The industry you work in. Businesses in certain industries face different risks than others. For example, builders and architects may have to pay more for cover than, say, marketing agencies, as the risks associated with their work are much higher.
  • The people you’re covering. Different members of your team will face different risks, too. For instance, it will probably cost more to cover warehouse staff than office staff, as warehouse staff face a higher risk of injury.
  • The area you operate in. Businesses based in London and other major cities may have to pay more for cover than businesses located in less populous areas.
  • Your claims history. Unfortunately, if your business has ever made a claim on your policy, it can raise the cost of your premiums. It largely depends on the frequency of the claims, and the severity.

How Much Does Small Business Insurance Cost – Rough Estimates

The cost of cover can vary greatly from business to business. Market conditions can also affect the price of premiums. So, please treat the following as rough estimates only. For a more accurate idea of how much you should expect to pay for small business insurance, get in touch for a free quote.

All of our figures are based on the averages provided by the finance and lending research and information specialists at Business Financing.

  • Public Liability – On average, small businesses pay £118 a year for public liability cover. Yet depending on the business, the actual premiums can be as little as £50 a year, or as much as £5,000 a year.
  • Professional Indemnity – Small businesses can pay as little as £115 a year for their professional indemnity cover. However, Business Financing reports that businesses working in certain high-risk industries may need to pay up to 10x more.
  • Employer’s Liability – As we mentioned above, it will cost a different amount to cover different employees based on the work they do. For desk-based workers, you might expect to pay £60 per year for employer’s liability. Yet for any employee who does physical labour, this can rise to over £200 a year.

These are just three of the most common insurance products that small businesses might need. The more cover you get, the more you will need to pay. See the full cover available through James Hallam.

How to Reduce The Cost of Small Business Insurance

When it comes to insurance, your priority should be to get the cover you need, and not to make your premiums as low as possible. But there are a few things you can do to reduce the cost of your business cover:

  • Pay annually, rather than monthly. Some insurers offer small discounts if you pay for your cover in an annual lump sum, rather than in monthly payments.
  • Choose a different level of cover. You have a legal requirement to get some forms of cover, such as employer’s liability insurance. Beyond your regulatory obligations, the amount of cover you get is entirely up to you.
  • Pay a higher excess. Offer to pay a higher excess in the event of a claim, and you can reduce your monthly premiums.

However, there are serious risks associated with each of these money-saving strategies. Paying annually for your insurance can lead to cashflow issues. Intentionally choosing less cover can leave you vulnerable to underinsurance. Paying a higher excess could lead to trouble if you ever need to make a claim on your policy, as it will mean that your settlement could be less than you need.

Talk To James Hallam About Your Small Business Insurance Needs

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.

Talk to us, and we can help you ensure you have enough cover to protect your business, at a fair price. We will take the time to understand your risks so we can tailor a flexible SME insurance package that offers full cover at outstanding value.

Get in touch for a free quote today.

Cyber & Data Risks Insurance
Cyber & Data Risks Insurance 1920 1280 James Hallam

Each year when completing a review of their insurances, most businesses will look at uninsured exposures with their insurance broker. Most of these can be reasonably ignored following simple cost-benefit analysis, but cyber is more difficult in that the associated risks and their potential cost to a business are still developing. It is anticipated though that the frequency and severity of such incidents will continue to rise, mirroring the experience of North America where cyber risks are given a higher regulatory and boardroom prominence. In the US it is now estimated that over 75% of corporate businesses purchase cyber insurance.

  • Different businesses will be exposed to cyber risk in different ways; some are reliant on their website to drive turnover, some rely on a hosted accounting or billing system to operate whilst others hold sensitive client data or intellectually valuable data on their systems. There are a multitude of scenarios that leave a business exposed to internal and external electronic threat. The failure of an IT network could be debilitating and a good first step is to identify and take steps to mitigate external and internal IT risks. These include:
    data theft or data loss
  • hijacks where hackers gain control of a system and demand a ransom to restore service
  • bot scams where viruses are used to take over large numbers of computers
  • basic human error (internally generated risks should not be overlooked and continue to be the most common proximate cause to a cyber loss)

Notification costs following the loss of third party data is now a major concern for EU business following GDPR. Safekeeping of data is the responsibility of the customer facing entity, notwithstanding that a third party processing company may have been the party that lost the data and/or contractual terms making a third party responsible for notification. This means if you are hacked and lose your customer data (names, addresses, credit card numbers etc.) you will need to report the loss to the data commissioner, possibly pay PCI fines, pay the cost of notifying your customers that they are at risk, pay for advice to manage their risks and pay PR costs to manage the potential damage to your brand and reputation. All of these risks can be insured and cyber insurance will additionally cover fines and penalties associated with regulatory investigations due to a privacy event.
The other major threat to a business may be the loss of a website and a resultant loss of revenue. Again, this can be insured.

  • The cyber insurance market has been developing at a rapid pace over the past five years as experience has been gained by insurers. Areas of cyber-risk that can now be insured include:
    replacing, restoring or recreating data that has been corrupted or destroyed by network failure or first/third party intervention
  • loss of data and notification management costs
  • criminal threat or extortion to release sensitive information or bring down a network unless demands are met
  • loss of income and extra expenses resulting from when a network is interrupted by attack. Covers criminal hackers, malicious insiders and denial of service (DOS) attacks, (including extortion monies)
  • payment fraud (deception of the insured’s customers into transferring over funds)
  • public relations expenses and crisis management
  • disaster recovery activation costs
  • fines and penalties where insurable by law
  • use of leased / rented external equipment
  • use of third party services
  • additional staff expenditure and overtime payments
  • terrorism risk, including ideological risk (LulzSec, Anonymous etc)

James Hallam Insurance Brokers have been placing cyber risk in the London market for over fifteen years. We source cover to insure against all of the above threats and, in addition, we can protect against risks that the majority of cyber insurers omit. For example, our favoured market will also provide:

  • the provision of first party cover on an “each and every claim” basis, ensuring that policyholders aren’t restricted by a policy aggregate and that the full benefits of cover are available each time a crisis strikes, even if they experience multiple cyber incidents in the same policy period
  • full retroactive cover as standard, meaning that policyholders are covered for breaches they discover during the policy period, even if it first occurred long before. Symantec has reported that the average time to discover a breach is 205 days, making this a particularly important feature
  • an extensive in-house incident response capability to ensure that cyber incidents are dealt with quickly and efficiently in real time. Initial response services are offered with no deductible payable by the insured
  • broader cover for senior executive officers who are regularly targeted in cyber attacks, covering theft of personal funds of individuals as well as those of the company
  • if a suit is brought against directors and officers following a cyber attack, the policy provides affirmative cover in the event that their management liability policy doesn’t respond
  • incident response costs are provided in addition to the policy limit
  • no excess is applied to the initial reporting and investigation costs
  • full systems failure is covered, including resultant business interruption
  • full Supply Chain is covered, including Technology suppliers (and non-Technology suppliers if named)
  • Cryptojacking and Botnetting are included under the definition of Cyber Crime
  • Additional Extra Expense coverage is included for costs above the normal operating expenses of a business
  • Hardware Replacement coverage is included for computer hardware or tangible equipment damaged as a result of a cyber event

Some points to consider when discussing Cyber Risk with your clients

Dealing with a ransomware incident is rarely a simple matter of the ransom payment being made and the business in question automatically regaining access to their systems and data. Even after a ransom payment has been made, and assuming the system can be successfully decrypted, the ransomware can have the unintended side effect of severely impairing the functionality of one or more of a business’s vital systems.

The use of legacy systems can significantly increase the risk of a cyber loss. Generally speaking, legacy systems are not only far more vulnerable to attack, they are also much more susceptible to dysfunction following a cyber attack.

The importance of having data re-creation cover is becoming increasingly apparent. Many cyber policies only provide cover for the cost to recover or restore data from back-ups, but not the costs to re-create or re-enter lost data from scratch. The bulk of the costs to a claim can come from the labour costs associated with manually re-entering data, and brokers should be sure to check that their clients have this important cover in place.

Almost all modern businesses have some form of cyber exposure. Even if a policyholder does not solely rely on their computer systems to carry out work, they will still have an office function that playing a key role in the running of the business. When the computer systems in an office are affected by a cyber event it will almost certainly have a negative impact on the overall business operation and having a cyber insurance policy in place will provide a valuable safety net for the company.

James Hallam can place cyber insurance in the London Market for business domiciled almost anywhere worldwide so please feel free to get in touch if you would like us to assist you and your clients.

Credit Insurance Can Be Essential To Your Business
Credit Insurance Can Be Essential To Your Business 1920 1280 James Hallam

2019 is set for a significant increase in business failures since those following the Global Financial Crisis of 2008.

Insolvencies will occur for reasons not seen before such as stress on cash flow due to stockpiling, delivery delay and failure to recognise the effect of tariff and regulatory changes.

  • All business sectors are likely to see margins and their ability to pay promptly squeezed
  • Several high profile insolvencies have occurred in 2018 and companies in many sectors are issuing profit warnings – even the on line retailer ASOS
  • The Office for National Statistics quarterly release shows insolvency  increases in Q3 2018 of +8.9% sequentially on Q2 and +19.3% on Q3 2017
  • This demonstrates a fragile economy with definite potential for more business failures in 2019

Suppliers of goods and services need up to date financial information to ensure customers are able to pay their invoices and the security of knowing unpaid debt is covered by insurance. Not only does a credit insurance policy provide debt collection and indemnity for non-payment following insolvency or protracted default but also REAL TIME FINANCIAL INTELLIGENCE

A ‘buyer’ of goods and services failing to meet debt obligations or with a weakening financial position will be alerted to credit insurers in advance of information becoming public. This critical data enables a credit insured company to review their exposure with vulnerable customers and minimise potential for bad debt

Credit Insurance offers a solution – let our experts speak to you about the benefits this can bring to your business

Allianz report reveals top fears for SMEs
Allianz report reveals top fears for SMEs 1920 1280 James Hallam

Brexit, theft and data breaches are all concerns facing SMEs, but what do they fear the most?

An independent study, which was commissioned by Allianz Insurance, has revealed what SMEs fear the most.

Conducted by market research company OnePoll and released today, ’Supporting SMEs to Prosper,’ an independent survey of 500 SME business leaders found that data breaches were top of their list of fears.

Click here to read the rest of the article by Insurance Times

Finding the Key to Schemes Innovation. Graham Whyatt discusses with Insurance Times
Finding the Key to Schemes Innovation. Graham Whyatt discusses with Insurance Times 1920 1280 James Hallam

Graham Whyatt, our group head of affinity & SME here at James Hallam, recently talked with Insurance times, concerning ‘Finding the key to schemes innovation’. He was one of six scheme specialists looking at the core requirements.

Click here to read the full story

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