Startup agencies often ask us which insurance they should seek out in those first few years. Of course, the answer to this will vary depending on the nature of your services and the structure of your business. However, there are many types of commercial insurance that all agencies should be aware of, and ideally hold.
In this guide, we’ve gathered a list of the basic insurance that we recommend all agencies consider taking out. It’s not exhaustive, and doesn’t cover some package extensions such as legal expenses or terrorism risks.
It also doesn’t include some areas that wouldn’t be relevant for the majority of standard agencies, whether due to them covering specialist activities or just being less usual for the industry, such as:
Professional Indemnity (PI)
PI cover pays to defend you for a range of situations that could arise because of the services you provide. If you lose the litigation, it also pays the damages and any costs awarded against you.
The core protection revolves around alleged negligence and errors and omissions. However, the best policies also include cover for IP infringement, defamation, breach of confidentiality/privacy, and breach of contract.
Public and Product Liability
This insurance protects your agency against legal actions for injury or damage to third parties – including injury or damage caused by your physical products.
The policy either pays to defend the case or, should your agency be liable, to settle instead.
Employers’ Liability
This cover protects your agency against claims for injury to employees, including self-employed freelancers under your control, volunteers, interns, and people in a work experience placement. Again, it pays to either defend you or to settle, depending on the situation.
Employers’ Liability cover is dictated by statute, so the protection is normally fine with whichever insurer you have. There are a couple of direct insurers who provide a limit of £5,000,000, though, which is out of step with the market. We recommend that agencies steer clear of these options as any change in HSE requirements could see you automatically become in breach of statute.
Property Damage & Theft
These types of policy pay for loss of or damage to your property. ‘Property’ includes:
The cover can be premises-specific, across multiple locations (including employees’ homes), or on a portable basis (from anywhere in the UK through to anywhere in the world).
Good policies can also automatically cover leased or hired equipment, providing that the sums insured remain sufficient.
Business Interruption
This pays for certain losses as a result of damage to or loss of insured property, as well as from other incidents such as utility failure or forced closure from public authorities. Please note that cover for closure from COVID-19 is no longer provided by any insurer we are aware of.
The cover provided would normally be a combination of lost revenue, lost profit and additional expenses incurred.
Cyber & Data
This cover varies quite significantly, but usually includes a combination of the below:
Data breach costs
This pays the forensic investigation costs you’d incur following a suspected breach, to find out where it has happened. In addition, it pays a range of expenses, including to notify all individuals who have had their data lost or compromised.
Privacy protection
This covers the defence costs for both the actions made by individuals against you and the investigation into your business for breaches of privacy. However, it doesn’t just cover the damages awarded from individuals – the policy also includes the payment of fines where allowable under law, such as payment card industry (PCI) fines.
Cyber business interruption
Having this cover means that you can recover the income you’ve lost as a direct result of an attack on your network which prevents you from using your systems.
Hacker damage
This section of Cyber & Data policies pays the costs to repair the damage to your systems or data following an attack. Essentially, it pays out to reconstitute your records and reinstate your systems.
Cyber extortion
Should someone threaten to take your systems down, the policy pays for both the forensic costs to get to the root of the issue and the consultancy fees to mitigate the problem.
Presently, certain insurers are still paying some of the ransoms demanded. But this is likely to change in the future, and isn’t something we would recommend relying on.
Media liability
This section includes a lot of covers usually found within Professional Indemnity policies – such as protection against alleged IP infringement, defamation, and negligent virus transmission – but is specific to content on your sites and systems.
Cyber crime
This provides cover for any financial loss suffered due to incidents like fraudulent instruction through social engineering or funds transfer fraud.
Management Liability
Similarly to Cyber & Data, this cover also comes in various forms. It usually consists of three key areas of protection:
Directors’ & Officers’ Liability (D&O)
D&O protects the personal liability of directors and people in higher management positions for actions taken against them in their personal capacity. Scenarios for this could include continuing to trade when insolvent, misappropriating trade secrets, and giving false information to potential investors. It also protects individual directors against actions from other directors and shareholders.
This cover pays the defence costs, and certain fines and penalties the individual may be required to pay should they lose the case. This is a critical policy in our opinion, as these actions are against individuals. That means your own personal assets are at risk for what can be very expensive situations, even when successfully defended.
Employment Practices Liability (EPL)
This is where employees allege that they have been unfairly (or constructively) dismissed or discriminated against. EPL is often included within a D&O package, and it pays for the costs and awards in employment liability actions including tribunals.
Corporate Legal Liability (CLL)
This provides a package of covers to protect the business itself. It’s like a corporate legal expenses policy, which can protect the business against costly actions from regulators, shareholders, creditors and other third parties.
Discover what protection your growing agency needs
Unsure which of the above insurance packages would adequately cover your business? Or think you need something that isn’t covered here? Our friendly team is on hand to get to know your agency and outline your options.
Simply give us a call on 0161 533 0411 or email info@riskboxuk.com.
Photo by Photo by Lauren Richmond on Unsplash
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