When it comes to Professional Indemnity claims, contract breaches are the usual suspects and complicated deliverables are often the cause. 

More and more digital agencies are building proprietary tools, deploying bespoke platforms, or integrating complex tech stacks to drive differentiation and capability. But take note, your internal systems may become part of the client deliverable and, in turn, part of your liability. 

If your internal systems fail and your clients are affected as a result, it’s logical that they’ll hold you responsible, right? Well, your Professional Indemnity Insurance needs to reflect that, and be robust enough to step in when your tech stutters and your clients suffer. 

Tech-driven agencies

While some agencies rely on off-the-shelf tools and standard deliverables, many are going their own way:

• Building proprietary dashboards for clients
• Integrating client data with third-party systems
• Automating workflows, deploying SaaS tools and offering ongoing support
• Working with platform/technology contracts rather than simply campaigns or projects

If this sounds like your agency, have you considered that by leaning more towards a creative studio, you’re now operating as a technology provider? If not, then you might have also overlooked the risk. 

Exposures to consider

There are a few ways your agency could be opening itself up to risk because of its relationship with technology.

System failure or downtime

If your internal tools fail and your client can’t deliver their service, you may face claims for breach of contract, loss of profits or remedial costs.

Data/integration risk

If you agree to a data migration project, a flawed integration or data error could result in regulatory exposure, client claims and subsequent damage to your agency’s reputation.

Hosting/outsource risk

If your services drop due to a failure of third-party providers, your clients will still hold you responsible and you will still be liable – whether contractually or through claims for negligence.

Their contract is with you after all, not the contractors you outsource to.

Scope creep and contract liability

Complex internal systems often come with complex client expectations around reliability, feature development, uptime and support. You might find yourself carrying operational exposures you hadn’t fully considered or even priced for.

IP ownership and licensing

If you build an internal tool for a client, who owns the intellectual property? This can be problematic when not defined at the outset – and even more so if you decide to reuse that tool or code for other clients, potentially giving rise to licence issues and IP infringement claims.

Cyber and tech liability risk

When you’re delivering software or digital tools, cyber risk (like breaches, malware and  ransomware) and tech liability (like software failure and data loss) are very real exposures. Standard agency Professional Indemnity may not be enough.

Insurance considerations for UK agencies

So, how can you protect yourself from the above scenarios?

Professional Indemnity policy scope

Review your Professional Indemnity policy and your technology liability exposure.

Consider whether your Professional Indemnity covers software failures, data errors and downtime, or whether you need a dedicated tech Errors & Omissions policy.

Cyber insurance

Seriously consider a comprehensive Cyber & Data insurance package. 

If your internal system holds or processes either personal data or critical client data, then a Cyber insurance policy may be required under contract with your client.

Contract risk

Understand your contractual exposure. If your client contract asks you to guarantee system uptime or compensate them for losses arising from your platform, then liability could escalate. 

Firstly, guarantees aren’t generally covered under Professional Indemnity insurance. Secondly, insurers usually require any liability agreed under contract to be reasonable, and will often refuse to quote if high levels of consequential loss are agreed to. Make sure your contracts don’t agree to unreasonable exposures.

Supplier risk management

Ensure your internal suppliers are contractually obliged to carry suitable insurance relative to both their risk and your contractual requirements with your client.

Get their insurance details and keep it on file just in case the worst happens.

Review tech exposure

Regularly review your tech stack and what risks it exposes your agency to. New modules, integrations and SaaS dependencies all add incremental risk.

Be sure to update your broker and insurer when your services change.

Differentiate with confidence, cover your tech complexity

An exciting transition is underway, where agencies’ tech stacks are reaching outwards to form the core of client deliverables. But digital progression brings fresh exposure in the form of system failure, data risk, IP issues, downtime claims and potentially extensive liability. 

Having the right insurance is vital, but so is understanding your system architecture, contractual exposure, dependencies and risk controls. If your tech is no longer just an internal tool, then treat it as the client risk that it is.

To keep developing your business, you need peace of mind that your current client-facing stack is covered. Get in touch with our team today and let’s have a conversation about exactly what you need to support your evolved use of tech.

Photo by S O C I A L . C U T on Unsplash