Most of us assume that a professional insurance policy primarily involves physical businesses. To be sure, packages such as public liability insurance and employee liability insurance are two plans which often come to mind.
This very same landscape has changed in recent times thanks to the continued presence of the Internet. It is now essential for many online businesses to possess a type of policy known as professional indemnity insurance in order to legally function. Let us take a brief look at how this type of cover operates, which businesses are required to possess it and some of the top reasons why such packages are critical for adequate financial protection.
A Brief Overview
This variant of indemnity insurance is primarily intended to be adopted by businesses that fall into a discrete number of categories. These generally include (but may not necessarily be limited to):
- Any site which provides professional advice
- A business that handles private data
- A company that is involved with the storage, modification or distribution of intellectual property
Of course, these are rather broad examples and it is best to consult with an expert to determine whether or not a specific online enterprise meets any of these (and potentially other) stipulations.
Some Types of Businesses Included
We have seen in the last section that this insurance plan is critical for a number of reasons. However, what are some modern enterprises that are likely to require such professional levels of coverage? A handful of the most common are:
- Solicitors and accountants
- Chartered surveyors
- Accountants
- Financial advisers
- Sectors within the health care system
- Website designers
In effect, any online firm which is at risk of offering incorrect advice or adversely affecting the position of a client with its services is likely to fall within this decidedly broad category. Even bloggers can be at risk if they provide poor advice and cause harm.
Some Typical Examples
It is prudent to highlight two different examples of when professional indemnity insurance is considered to be mandatory.
First, let us imagine that a budding financial advisory firm has just recommended a security that is about to come to market. Eventually, it is discovered by the FCA that the security in question was fraudulent and yet the financial portal encouraged its clients to invest heavily. Without this type of indemnity policy, it is likely that costly legal battles would occur. The company might not have the finances to continue its day-to-day operations.
Another instance could be when an online auction site has stored massive amounts of personal data on its internal servers. It is soon discovered that these servers have been corrupted and an appreciable amount of information was stolen. In such an event, it is highly likely that a class-action lawsuit could be brought against the firm by its clients. Without indemnity insurance, this would result in grave consequences.
Finally, let us not forget that many high-end customers will simply refuse to deal with an organisation that does not provide evidence of this type of coverage. Therefore, it is always a good idea to consider one’s options in order to make the best decisions possible.
It may not always be clear if this coverage is absolutely necessary. Any doubts should only be addressed by trained professionals within the insurance sector.
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