While self-employment continues to boom in the UK, many businesses are operating without basic protection, reveals a new study by AXA.
The study showed that professionals, who are turning freelance in record numbers, are the most likely to miss out on insurance, while tradesmen safeguard their businesses best.
AXA found that most (83%) tradesmen have public liability insurance for what are traditionally known as ‘tradesmen’s risks’: accidents, injuries and property damage. By contrast, only 35% of self-employed professionals have professional indemnity insurance for mistakes in their work.
So, why is the average builder better protected than the average consultant? The study found that confusion about policies is leading many professionals to make potentially costly mistakes with their insurance.
Confusion leads businesses to reject insurance
A common myth is that claims cannot arise from desk-based work. Half of freelance professionals say they don’t need insurance because they are unlikely to cause injuries to anyone – failing to appreciate that they could cause financial or reputational damage to clients instead.
One in ten professionals, meanwhile, haven’t heard of professional indemnity insurance. And a further 12 per cent wrongly think it covers accident and injury claims.
To clear up the confusion, AXA highlights some recent examples of costly mistakes by freelance professionals:
- An IT contractor mistakenly transferred £10,000,000 in company funds while testing a new system
- A consultant left a laptop with a list of a well-known company’s employees – and their redundancy payments – on a train
- An accountant quoted the wrong price when selling a company’s assets, leading to a £22,000 loss
“It’s easy to imagine how someone would react if a hammer fell on their foot, and you’d expect a claim to follow.
“Mistakes in professional work are less tangible: like missing a nought off a price in an advert or deleting client tax records by mistake. Accidents like these can be just as damaging to your business though if a client decides to sue for professional negligence.
“We’d advise businesses that if customers rely on their advice, it’s likely they need professional indemnity cover. Do your research first though – your professional body, financial adviser and insurer can all confirm whether you need it or not”.