Key Insights for SMEs: Professional Indemnity 2024

Professional indemnity (PI) insurance is not limited to traditional professions. This article is your guide into how PI works for SMEs and why you should consider taking out a policy.

What is PI insurance?

PI insurance is a useful policy for businesses that give advice or provide specialist services to clients for a fee. Those services can include – but aren’t limited to – project management, designs, and specifications.

It aims to cover risks relating to alleged negligence or failure in your advice or services to clients. Mistakes, professional errors, omissions, even not meeting deliverables on a contract, such as not building a website on time, fall into this ambit.

PI insurance typically offers coverage for:

  • Financial loss your client suffers due to your professional negligence, error, or breach of duty
  • Legal and regulatory costs (also known as Claims investigation costs) to defend claims, including inquiries, investigations, lawyer fees, disciplinary proceedings, court action, and fines
  • Breaches of confidentiality, whether intentional or unintentional, that cause financial loss to your client

Is PI insurance compulsory?

The requirement to have PI insurance cover depends on the sector in which you work and the type of advice/services you offer. It’s mandatory for professions such as lawyers, financial advisors, tax practitioners, doctors/health specialists, but different states and territories may have there own requirements for practitioners in different industries. Often, regulations will set down a minimum dollar coverage for professional indemnity insurance.

Sometimes, your client may require you to have a policy in place before they engage you, such as for high-value projects.

Should I have it if it’s not required?

PI coverage is available to many other non-traditional professionals including freelance creatives, marketing agencies, IT consultants and more. Having PI cover gives clients confidence and trust you’re in business for the long haul and take responsibility for your work. They may expect it even if such cover is not compulsory.

Investing in a PI policy shows you are a professional with a clear commitment to quality. Having a PI policy will reduce the financial impact of unexpected expenses relating to your professional liabilities.

Doing a thorough risk assessment can help you work out if PI cover is a ‘nice-to-have’ or ‘must-have’ for your unique business circumstances.

Factor in these common risks, too: Digital transformation and cyber security, and greater regulatory scrutiny, which leads to potential claims.

Two common misconceptions about PI insurance:

  • Your cover begins when your policy starts – often policies are retroactive, usually subject to having continuous PI cover since commencement of the business
  • Cover can end when you stop practising – actually, run-off cover is advised to protect you against claims when you’ve finished practicing.

Why it pays to have PI insurance

The right-fit PI policy gives you peace of mind, so you can focus on business operations rather than worry about potential claims. As your broker, we can help you secure customised cover that will suit your budget, needs and requirements.

Make sure you’re covered for the year ahead.