What is management consultants professional indemnity insurance?

February 1, 2010 · Filed Under Management Consultant Professional Indemnity Insurance 

What is management consultants professional indemnity insurance? Also known as PI insurance or PII, this protects companies offering advice or consultancy services. In some industries, having professional indemnity insurance will often form part of a contract between a supplier and the client in order to protect both parties against financial loss that occurs as a result of error or omission.

This may typically include things like:

  • a negligent act;
  • libel and slander that is unintentional;
  • infringement of intellectual property rights that is unintentional;
  • loss of documents or data;
  • unintentional breach of confidence or misuse of information.

These are all things that can happen, even to the savviest of business people with the best staff. And if you or your management consultants company is sued for damages as a result of one of these things, then:

  • your reputation could be destroyed;
  • unless you have PI insurance in place, you will have to pay for the costs of defending yourself and any awards made to the other party.

Management consultants professional indemnity insurance can typically help your business at times like this by providing assistance so that you do not lose out financially. (Of course, there is usually a pre-agreed excess that you will be liable to pay and limits to claim amounts). The alternative – funding the costs yourself – could see you seriously deplete your firm’s financial reserves or even see it go under.

The FSA definition of professional indemnity insurance

The independent non-governmental body the Financial Services Authority (often referred to as the FSA) defines professional indemnity insurance as “a liability insurance that covers businesses in the event that a third party claims to have suffered a loss as a result of professional negligence”. In layman’s terms, this means that the management consultants professional indemnity insurance can typically step in and cover at least some of any financial losses incurred by a company – subject to the claim being accepted by the insurer of course.

As with all insurance policies, management consultants professional indemnity insurance policy benefits and features can vary depending on who you buy your cover from, so do check the small print so that you fully understand what the PII cover provides. If you have any doubts, contact your provider.

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