Business risks and IT Consultants insurance

May 9, 2010 · Filed Under IT Consultants Insurance 

For IT consultants, mistakes may prove to be very expensive. IT consultants insurance typically exists to help protect you against such costs if you’re unlucky enough to incur them.

Why do IT consultants need insurance?

If you accidentally create a problem for a client or even if they just believe you have created a problem for them, then you may hope that a rational discussion will be all that’s required to resolve the issue.

If that works then fine – but what if it doesn’t?

Business today typically can’t afford mistakes. Errors cost money and like it or not, we live in a business culture where increasingly the philosophy is that someone must pay.

If your services result in serious damage to your client, then they may take you to court seeking financial restitution – and that’s unlikely to be for trivial sums.

If you don’t have IT consultants insurance then typically you’ll need to find these sums yourself.

If this sounds implausible:

  • in 2008 British Gas demanded compensation from consultancy Accenture of around £182million for a flawed IT system.*

I’m not a big company!

Perhaps not, but it only takes one mistake by one person to sometimes cause potentially very serious and expensive consequences.

IT consultants insurance is part of what’s commonly termed professional indemnity insurance or PII for short. It can offer protection against various professional risks that could result in legal action against you.

The exact nature of the cover provided varies depending upon the provider of your insurance and the product you select. Typically you may find protection against things such as:

  • accidentally losing key information of your clients;
  • accidental contravention of confidentiality and non-disclosure agreements;
  • accusations of slander or libel;
  • infringing (unintentionally) someone’s intellectual property rights.

It’s perhaps worth contemplating that a court may not take much notice of the size of your company when making awards – they may be much more focused on the damage sustained by your client.

That’s why the awards may be large and certainly big enough to cause you serious financial pain.

Even if you do not lose such a case, you can’t guarantee being awarded costs and you may have run up significant legal bills in making a case for your own defence.

It won’t happen to me!

It’s certainly to be hoped that you do avoid being sued but is that hope something you’re willing to gamble your professional and possibly personal financial future on?

Of course, having IT consultants insurance can’t stop one of your clients suing you. It may mean though that you can rest a little more easily knowing that if the worst happens, you have financial support to fall back upon.

*Source: Contractor UK –


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