Why Should Start Ups Carry Professional Indemnity Insurance?

Establishing a start-up can be a very exciting time for those entrepreneurial minded individuals out there and the thrill of getting your product or service out into the world can overshadow some of the more tedious aspects involved in setting up a company. However, some of these are the foundations of navigating risk in the world of business.

Whilst an entrepreneur can be snowed under with all the bureaucracy, from accounting issues to regulatory obligations, one essential element of starting a new business is risk management and, in particular, having an insurance portfolio capable of mitigating potential risks in the early stages of commerce.

Whether your client provides design services or offer advice a key part of your client’s insurance portfolio would be Professional Indemnity Insurance.

Prior to my position with Servca, I was a Regional/Retail broker myself and there is nothing more exciting for a regional broker than a call from a new client, with a business idea which he or she is passionate about.

This gives you the opportunity to demonstrate your professionalism to your client from the offset and really focus on building a long-term relationship, this is where at Servca we will be more than happy to guide you through the PI purchasing process and build this relationship with you and your new prospective client.

What Is Professional Indemnity Insurance?

Professional Indemnity Insurance protects your or your client’s business against claims that arise due range of civil liabilities including negligence, breach of contract, defamation, breach of privacy, employee dishonesty and intellectual property infringement. For example, a printing business that negligently misprints a batch of flyers including a typing error that causes their client a financial loss or an Accountancy firm failing to inform their client that their income had exceeded the VAT threshold.

Negligence

Depending on the type of policy, a Professional Indemnity policy would provide your business cover for claims arising out of a breach of duty of care by the way of a negligent act, error or omission. This is a vital element of cover for a start-up, especially when working through the teething problems in the early days of doing business

Legal Costs

In the event of a claim, legal costs can have a huge financial impact on the largest of corporates so should a start up business be liable to pay legal costs from their own pocket, the consequences of this could be severe. A Professional Indemnity policy would provide you with peace of mind in that regard and help provide cover for the legal costs involved in a claim either within the limit of indemnity or outside of this,

Breach of Intellectual Property

New business can often fall into the trap of unintentionally breaching the copyright or intellectual property of another business and disputes over the breach of IP could be incredibly costly in terms of the legal costs involved and any compensation that you or your client is ordered to pay. Having a PI policy will protect your business against financial loss.

Defamation and Libel

In this age of social media and being able to post content at a click of a button, it is probable there is going to be a few errors made along the way and potentially something could be said that could be deemed as defamation or libel. In order to protect your business against any errant remarks made in public your client should certainly look to obtain Professional Indemnity insurance which will provide cover for the hefty legal fees and compensation involved in these types of claims.

Business Growth

Having a Professional Indemnity policy in place will help you grow your business from a start-up into a fully-fledged commercial entity by showing future employers that your client is taking responsible steps in respect of their risk management and will enable them to win contracts that they are looking to bid on in the future. Some employers require that their contractors do indeed have a certain limit of Professional Indemnity before engaging, however, having a Professional Indemnity policy early on can provide potential employers with the comfort that the business is financially responsible and are serious about the risks involved in doing business.

Summary

In summary, in the age of start ups and entrepreneurialism, it is essential to make risk management an integral part of the strategy of a start up and not only would it provide value in the sense of protecting the business and smoothing the peaks and troughs in financial performance but it will also benefit the business by attracting new clientele and winning contracts.

At Servca, we are experts in Professional Indemnity insurance and are working with the world’s leading London Market & Lloyds insurers, so should your client need a specialist provide them with a bespoke quote that fulfils their need as a start-up company, please do get in touch.

George Grimshaw

New Business Account Handler (UK & International) at Servca

[email protected]

+44 (0)203 0263686