Professional Indemnity insurance requirements

[nkgee]

I need to get PI insurance for my tiny 2-man business consultancy as a contractual obligation but am finding it impossible to even get a quote. Not because my business is small (under £100k PA rev) but because A) I occasionally work with US clients and B) I was a director on a start-up that was put into voluntary liquidation 4 years ago (some start-ups fail, shock, horror!). Both seem to be red flags for every underwriter for some reason and everyone is declining to even quote.
Anyone have any advice?
Also how do angel and VC investors/directors with lots of investments handle this as there aren't going to be many with 100% success records? Do they simply lie?

 

[WaveJumper]

Speak to our forum member @Frank the Insurance guy he should be able to offer some words of wisdom and point you in the right direction.

 

[The Byre]

Anyone have any advice?

No. But I'm sure one of the insurance guys will come along sooner or later and give you some answers.

Also how do angel and VC investors/directors with lots of investments handle this as there aren't going to be many with 100% success records? Do they simply lie?

Investors structure their investments so that they are not exposed to that sort of risk. That is either by investing in companies that are already fully functioning and carry all the usual cover or by investing in kind - for example, by providing facilities in exchange for a percentage of profits. Another method for keeping clear of pitfalls is by setting up a symbiotic relationship with the small company by contract.

I do invest in companies but I always go for companies where the other investors are known to me and I sort of fly in on their coat-tails! "Well, if Rick's in, then we'll have a go! He seems to know what he is doing!"

But actually getting folding money out of me for a one-man/two-man show, hmm . . . All I can say is "The smaller the company, the greater the risk, so good luck with that one!"

 

[Frank the Insurance guy]

A) I occasionally work with US clients

B) I was a director on a start-up that was put into voluntary liquidation 4 years ago

Hi @nkgee

Sorry to hear you are having trouble sourcing insurance.

Both the above can cause issues and "red flags" to some insurers, which definitely narrows the availability of cover (and therefore increases in premium).

US Clients
This is the easier of the 2 - there are still plenty of insurers that would offer a quotation to include claims brought against you in the USA. Unfortunately there is a costs - most insurers at Lloyds of London will want a minimum premium of £5K!, but there are some outside of Lloyds and in the traditional market that can offer lower premiums.

Previous company in liquidation
This is more difficult. Insurers will need full details of the previous company and what happened. You need to be able to provide insurers/underwriters with the comfort that what happened at the previous company was a one-off and will not be repeated. If your current company is a new business/startup, and in the same industry, it will be harder to do this.

Other consideration
If you are in the financial services/fintech or Construction industry, it is a pretty tough Professional Indemnity Insurance market to be looking for quotes in, regardless of the above 2 issues.


I suggest you speak to an independent insurance broker who will take time to listen and understand your business. As an independent broker they should have access to a wide range of insurance providers to source a quotation.

The big question is whether the quotation would be financially viable compared to the value of the contract that requires you have it?

Feel free to get in touch (my contact details below), if you would like to chat things through.