Professional indemnity insurance more important than ever

Professional indemnity insurance has never been more important than it is right now, according to one leading commercial insurance firm.

Insurance brokers Garratts has warned that in the current economic landscape, clients have shown a tendency to be more inclined to take legal action against a business if things go awry. Professional liability insurance claim rates traditionally undergo increases in the midst of an economic downturn, and according to the broker, companies can find it exceedingly difficult to win business without proper business liability insurance if the number of firms being sued goes up.

Court costs can easily undermine a firm’s working capital if the company wishes to properly repudiate claims brought against it by angered clients.  In some instances, even allegations wholly lacking in merit can strain a company’s resources to the breaking point.

Garratts remarked that any policy worth its salt should cover the costs incurred in the defense of any allegations or claims.  Moreover, the insurance broker added that each policy should be tailored specifically to the needs of each individual client in order to ensure they are covered for any eventuality.

In addition to the tendency for clients to bring suit against firms during an economic downturn, other factors that may lead to an increase in claims have also arisen recently.  The Financial Services Authority recently announced it was increasing the Financial Ombudsman Service’s maximum award payout to £150,000, and the £50,000 increase could lead to more clients seeking restitution through the FOS.

Industry experts believe that this new increased upward limit on FOS awards could also lead to some insurance companies increasing their premium prices, as these insurers begin predicting higher costs due to claims numbers rising.

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