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19 August 2020

Why maintaining Professional Indemnity cover is a priority in the pandemic

The current downturn in the economy, occurring as a result of the Government’s actions to slow the spread of Covid-19 in the UK, is producing challenging trading conditions, with many businesses facing a tough time. With reduced levels of income and financial uncertainty being a reality for many; some businesses may be struggling to cover outgoings, including insurance premiums. Here, we explain why it’s essential to maintain your cover and to have the most suitable cover in place.
 
What is PI Insurance?
Professional Indemnity Insurance protects you in the event that professional services you have provided, such as advice, guidance or design, causes a third party to suffer financial loss. Most PI policies cover not only the third party’s loss, but also the costs you may have incurred, such as legal or expert fees, in defending or settling the claim.
 
Who needs it?
Any business or individual offering specialist advice or guidance, or marketing themselves as having a greater than average degree of knowledge, can be liable to a third party. Generally speaking, PI insurance is compulsory for certain businesses, such as architects, surveyors, and GPs, but given our increasingly legally active culture, potentially any business giving advice should have this cover, including business analysts, consultants, marketeers and IT specialists. It is worth noting that you don’t necessarily need to have been paid for providing advice for liability to occur.
 
Typical features of PI insurance include:

Why should I keep PI going?
Professional Indemnity insurance is arranged on a ‘claims made’ basis, which means that cover must be in place at the time of the claim, not at the time of the incident the claim arises from. This means, if you were to cancel or reduce your level of PI cover, possibly due to current financial difficulties, it could leave you exposed to potentially costly claims - the cause of which may have occurred historically, possibly even months or years before - without cover in place to help pay your defence costs and any compensation due.
 
Make PI a priority
It is essential to keep your PI insurance in place even if your business has to temporarily pause trading or cease trading altogether due to the current economic conditions. We would certainly recommend that you keep a minimum of two years’ run-off cover in place, ideally six years, so that you have protection in place against any historical claims. Cancellation could leave your business exposed to further financial risk.
 
Help and assistance
Many businesses are currently looking to reduce overheads and we understand that paying your insurance premium may put a severe strain on finances that have already been stretched to the limit.  If you would like guidance on what type of PI insurance you need or require an alternative quotation, please contact us to receive an impartial review.

To find out more, please call 0116 265 4300 or email [email protected]