Agencies, Blog - August 29, 2023
Agencies With Insurers As Clients: The Conflict Of Interest Explained
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Over the years, we’ve insured several creative and digital agencies who have provided services to insurance companies, from software to PR assistance. It might seem like the right thing to do would be to return the favour, and take out insurance with that provider. But that’s never a good idea.

This is because it creates a clear conflict of interest which could have major implications if there was ever a claim. A diligent insurer should ask an agency for confirmation of their Professional Indemnity insurance before commissioning them to do work – and if the agency happens to be insured by them, they should require them to find another provider before agreeing to sign the contract and start the project.

Whilst that does happen most of the time, we’ve seen several instances where insurers have missed this in their due diligence. Although that isn’t great from insurers, the agency is equally at fault, as they should recognise the potential for issues down the line

In its simplest form, if the insurer alleged that the agency had made serious errors in the work delivered, they would essentially be both the plaintiff and the defendant. And in its most extreme form, they could be tempted to reject the claim, allowing the insurer to sue an uninsured agency rather than having to stump up the settlement themselves.

Let’s take a look at this in more detail…


What issues would arise from the conflict of interest?

Impartiality and fair assessment

Professional Indemnity insurance is meant to protect the insured party (in this case, the creative and digital agency) from claims made by clients or third parties arising from professional errors, negligence, or breaches of duty.

When the insurer is also a client, there’s a potential conflict of interest, because the insurer may prioritise their client relationship over impartial claims assessment. This can lead to biased evaluations and an increased likelihood of denied claims or inadequate compensation.

Objective claims handling

Professional Indemnity claims require an objective evaluation of the circumstances surrounding a claim. Insurers should thoroughly investigate claims and determine the appropriate course of action, such as negotiating a settlement or defending against a claim.

When the insurer is also a client, their objectivity may be compromised due to the existing business relationship. This can result in a lack of rigorous evaluation and potential favouritism towards the client/insurer, rather than ensuring fair treatment for the agency.

Confidentiality and information sharing

Insurers typically require access to sensitive and confidential information about the insured agency’s operations, projects, and potential risks in order to underwrite the policy and handle claims.

When the insurer is also a client, there’s a risk that confidential information may be shared with the client/insurer, potentially compromising the agency’s trade secrets, intellectual property, or other sensitive data. This could lead to competitive disadvantages or confidentiality breaches.

Perception of bias

Even if the insurer maintains professionalism and tries to handle claims fairly, the fact that they’re also a client can create a perception of bias or favouritism amongst other clients or third parties. This perception alone can damage the agency’s reputation and relationships with other clients, leading to a loss of trust and possible business opportunities.


How RiskBox can help

To avoid these potential issues and conflicts of interest, it’s advisable for a creative and digital agency to have their Professional Indemnity insurance with a separate insurer who isn’t a client. This ensures independent claims assessment, impartiality, and confidentiality – plus, it avoids problems that could arise from the insurer-client relationship.

If you’re an agency working for an insurance company who is also a client, don’t wait until it’s time to renew. Find an alternative insurer immediately. For support from RiskBox, or to ask a question about anything we’ve covered in this blog, reach out to us today. You can call our team on 0161 533 0411, or fill in our contact form and we’ll get back to you.


Photo by ThisisEngineering RAEng on Unsplash

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