Safeguarding your business: the importance of public, employer and professional liability insurance

When people think about public liability insurance, their thoughts can be drawn to compensation claims that are made against tradespeople who cause damage or injury to a third-party when operating in a customer’s home.

While public liability insurance may well protect against such an event, it also offers more comprehensive coverage across a variety of industries. After all, it can safeguard companies in instances where customers or clients are injured in their workplace, while associated products such as professional indemnity insurance can protect service providers when they are accused of offering inadequate advice or designs.

There are also considerations such as employer’s liability insurance, although it is a legal requirement for SME’s to purchase this product and safeguard the interests of their staff members. These products can all be combined to help establish a protected and viable business proposition, and one that does not incur significant legal issues in the future.

The facts

To understand the importance of these products, let’s take a look at some statistics from the UK market. During the last five years, an estimated 24 per cent of SME’s have had a current or a previous employee file a claim against them, while 84 per cent of employers in the UK believe that the nation is gripped by a compensation culture. However, the fact that firms are legally required to purchase this type of insurance has helped to reduce the potential costs facing SME’s, while also safeguarding the rights of employees.

The same cannot be said for public liability insurance or professional indemnity insurance, however, which can be purchased with employer’s liability insurance but are not compulsory requirements. In a bid to reduce start-up costs, some SME’s may therefore be tempted to disregard these products, which will have a variable impact depending on the precise nature of their operations. As a general rule, practising businesses will require at least one of these two products, but there is a compelling argument to invest in both in the current climate.

Companies that offer legal, financial or strategic advice will obviously invest in professional indemnity insurance, of course, but this will not safeguard them if their client suffers an injury while visiting their offices. In this respect, public liability insurance would offer an additional layer of protection, while contributing to the type of comprehensive coverage that minimises the risk of future (and costly) litigation. The same principle applies to tradespeople and construction service providers, who may be required to offer professional advice about the use or maintenance of appliances after they have been installed.

How SMEs can comply with UK law while also reducing costs

The primary barrier to SME’s is the cost of procuring such comprehensive coverage, even allowing for its potential benefits and the mandatory requirement to invest in employer’s liability insurance.

Ultimately, you should seek out advice when choosing which insurance products to buy. The key is to focus on optimising your level of relevant coverage and protecting the long-term interests of your business, while seeking out tailored policies to suit your precise needs.