We carried out some research recently and one of the most shocking findings was small businesses and freelance consultants delay purchasing professional indemnity (PI) insurance for an average of six months after setting up in business.
39 per cent of respondents didn’t purchase professional indemnity insurance until at least three months after they had been in business, with 20 per cent waiting two or more years.
The industries or professions most ‘at risk’ (because those we surveyed delayed purchase of PI insurance for the longest time) are design, engineering and marketing and communications. On average, 43 per cent of businesses in these three sectors waited two or more years before purchasing PI insurance.
By contrast, 90 per cent of accountants purchased PI insurance straightaway, with the remaining 10 per cent purchasing cover within six months.
It’s encouraging that more than half of respondents clearly recognise the importance of PI insurance, evident by their arranging it immediately. However, the fact that many waited until they’d been in business for some time was a shock.
Businesses that delay purchasing PI insurance are placing themselves at risk. A client could make a claim against them for negligence. PI insurance covers damages and legal defence costs – which can have a devastating impact if you lose your case and don’t have any cover.
It’s clear that there’s a stark difference between sectors, with those in more regulated fields such as accountancy and consultancy likely to purchase PI insurance from the outset. In contrast, the more creative sectors such as marketing and design, delay, which places them at higher risk in the event of a serious dispute.
Nick Green, PolicyBee, professional insurance brokers