By Marcus Leach
Small businesses and freelance consultants delay purchasing professional indemnity (PI) insurance for an average of six months after setting up in business, according to new research undertaken by specialist business insurance broker, PolicyBee.
The survey also found that 39% of respondents did not purchase professional indemnity insurance until at least three months after they had been in business, with 20% waiting two or more years until they purchased professional indemnity insurance cover.
The industries or professions deemed to be most ‘at risk’, (due to respondents leaving the purchase of PI insurance for the longest amount of time) are:
- Marketing & Communications
On average, 43% of businesses in these three sectors waited two or more years before purchasing professional indemnity insurance.
In contrast, the research revealed that 90% of accountants purchased professional indemnity insurance straightaway, with the remaining 10% purchasing cover within six months, making them the quickest sector to purchase indemnity insurance.
“It’s encouraging that more than half of the respondents clearly recognise the importance of professional indemnity insurance by purchasing cover immediately," Valerie Hockley, Managing Partner at PolicyBee, said.
"However, we were shocked to discover that many other businesses waited until they’d been in business for some time, before obtaining cover. It is particularly striking that one in five respondents had been in business for two years or more before purchasing professional indemnity insurance, during which time they’d have been exposed to a considerable risk.”
Businesses that delay purchasing professional indemnity insurance are placing themselves at risk, should a client make a claim against them for negligence. Professional indemnity insurance covers the costs for damages and legal defence - costs which can have a devastating impact on a small business or freelance consultant.
“It is clear that there is a stark difference between industries, with those in more regulated sectors such as accountancy and consultancy likely to purchase professional indemnity insurance from the outset," Hockley continued.
"In contrast, the more creative sectors such as marketing and design, delay their purchase, which places them at higher risk in the event of a client dispute.”
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