How to assess your professional indemnity exposure and risks

Professional service providers face unique on-the-job risks. Providing expert advice, designing custom solutions, and representing a client’s interests on their behalf create professional indemnity exposures that could have a huge impact on your small business.

You might feel like you’re across every risk to your business, but some might be flying under your radar. That’s why it’s essential to assess your indemnity risks so you can put steps in place to protect yourself, your business, and your professional reputation.

What are potential professional indemnity exposures?

A professional indemnity claim happens when a business fails to meet the obligations or professional standards expected of them. This may include things like:

• Mistakes, errors or omissions in your work
• Providing an incorrect diagnosis or treatment
• Breaches of duty
• Loss of documentation
• Failing to meet a deadline
• Not meeting your client’s expectations

Professional indemnity exposures can have serious consequences for small businesses, particularly if you fail to recognise and mitigate them. This could include:

• Financial losses
• Expensive and lengthy legal disputes
• Damage to your professional reputation
• Loss of clients and future business opportunities

Businesses across various industries may need to assess their indemnity risks, such as accounting, real estate, management consulting, personal training, allied health, and engineering—just to name a few.

How to assess your indemnity risks

Identifying potential professional indemnity risks is the first step towards minimising these exposures. To assess your indemnity risks, you may need to:

Measure yourself against industry standards

Unsure where to start? Comparing your business to others in the same industry may good first step.

Many industries have best practices that their professionals are expected to follow. While some may be evergreen, a professional’s duty of care can change and evolve over time. Scheduling regular training and professional development could help you and your staff stay on top of these trends.

Review your risk management plan

Are you following steps to help reduce mistakes in your work? It might be time to review it—or write one if you haven’t already.

A risk management plan is a strategy used by many small businesses to catch errors before they become a problem. This may include steps like mandatory checks, backing up project data, or following up client phone calls with an email summary of what was discussed.

You may want to regularly review your risk management plan. Look for potential cracks where mistakes might slip through and find ways to close these gaps.

Review your contracts and agreements

Is it crystal clear to your clients what services you’ll be providing? If not, you could be open to a lawsuit.

Setting clear expectations can do a lot to prevent unhappy clients. Ensure your contracts and agreements clearly spell out your responsibilities, deliverables, and deadlines for each project. That way, you and the client will be on the same page from the start.

Of course, things don’t always go to plan. It may help to keep your clients in the loop about issues or potential delays as early as possible.

Manage risks with Professional Indemnity insurance

Assessing indemnity risks could help your small business identify and mitigate potential issues. However, even the most careful professionals may still face a professional indemnity claim or lawsuit. That’s why many small businesses have Professional Indemnity insurance.

Professional Indemnity insurance protects you against losses claimed by a third party due to alleged or actual negligence in your professional services or advice. Subject to applicable limits, your Professional Indemnity insurance will meet the associated compensation payable to a third party together with your defence costs (which can include legal costs, investigator costs and expert fees).

Professional indemnity claims and lawsuits can be expensive. A policy helps shield your business and personal finances, so you can keep your business running while responding to the claim.

Even if you’re not at fault, professional indemnity claims can be expensive. The last thing you want is for frivolous lawsuit to end your small business dreams. Professional Indemnity insurance can help protect your bank accounts, so you can continue serving your clients.

Are you ready to protect your small business? Compare Professional Indemnity quotes with BizCover and get instant cover in as little as 10 minutes. You might even find savings while you’re there!

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