Insurance · 26 January 2016

Professional indemnity insurance considered non-essential by vast majority of small firms

Professional indemnity insurance
Damage caused by poor guidance can result in hefty legal costs for uninsured businesses (Image credit: 1000 Words /

Some 64 per cent of UK small businesses are not covered by professional indemnity insurance, according to new research by – with the most common reason for this that owners see no need for the protection.

Firms in the construction, engineering and property industries were the most likely to not have not taken out a policy – and one in ten owners of such businesses indicated they thought the cover was too expensive.

Professional indemnity insurance protects businesses in the event that advice provided by the firm causes a customer to lose money. Having this type of insurance in place is a common requirement for bidding for government contracts.

Solicitors, accountants, financial advisers, architects, and chartered surveyors are also required to have the cover in order to join professional organisations – but there is no legal obligation for them to do so.

Lyndon Wood, CEO of, commented: “We’re shocked to hear just how many small business owners in the UK don’t have this insurance; it’s absurd. Those who say they haven’t invested because they’ll never require professional indemnity insurance are those who are most likely to one day be in a position to use it.

“Ultimately, it’s better to have indemnity insurance and not need it, than the other way around. If a claim were made against someone who didn’t have the insurance, it would cost them much more to cover the fees, which could prove particularly damaging for small businesses. For as little as £80 per year, it’s worth getting to settle any fears or concerns.”

The market for professional indemnity insurance grew by seven per cent from 2010-2014 – and insurers including Direct Line responded by offering the product for the first time in 2015.

A study carried out by the insurer to coincide with the launch found that small and micro businesses had lost some £6.4bn in the 12 months to June 2015 due to bad advice – and also revealed that £20,000 of damage caused by poor guidance can result in some £100,000 of costs to any uninsured business which provided the information.

“Our research clearly highlights the devastating effect poor professional advice can have on small and micro businesses,” said Nick Breton, head of business insurance at Direct Line.

“However the impact on an advisory firm that is facing litigation can be just as shattering. For those providing advisory services, it is important to recognise that issues can occur and clients could pursue them for compensation,” he added.

It isn’t enough just to have insurance – making sure you have the right level of cover is vital, as this article explains. 

Sign up to our newsletter to get the latest from Business Advice.



Hannah Wilkinson is a reporter for Business Advice. She studied economics and management at Oxford University and prior to joining Business Advice wrote for Kensington and Chelsea Today about business and economics – as well as running a tutoring company.

From the top