Computer Retailing Professional Indemnity Insurance
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Professional Indemnity Insurance Policy Highlights
How do Professional Indemnity insurers view the IT industry?
Professional indemnity insurance cover is necessary for computer retailers and it should be borne in mind that, because of the reliance many firms place on IT systems, the potential losses incurred by businesses may far exceed the cost of the IT project itself, and limits of indemnity need to be set accordingly. IT companies and the services they offer are not easy to categorise, largely due to the wide range of business and industrial environments in which IT professionals work.
Broadly speaking, work carried out by IT companies falls into one or more of the following areas:
- Packaged hardware/software provision
- Development of bespoke solutions
- Consultancy/project management
- IT recruitment
- Internet service providers
Why Do Computer Retailers Need Professional Indemnity Insurance?
Professional Indemnity Insurance is liability insurance that covers your legal liabilities in the event of a third party taking legal action against you, claiming to have suffered a loss as a result of advice that you have given in a professional capacity.
Here are some of the things that could give rise to a claim against your business and for which you could be covered by professional indemnity insurance:
What do Professional Indemnity Insurers look for?
The central question is what would be the immediate financial and other consequences if data is incorrect or a system fails or becomes unavailable for any period of time. A lot depends on the precise function of the software and what commercial application it is being used for.
The main areas that give rise to litigation against IT companies are:
- Failure of the software/system to do the job for which it was intended (fitness for purpose).
- Failure to deliver the system on time.
- Failure to deliver the system to budget.
These can give rise to three types of claims:
- Client withholds or claims for return of the purchase price/fees paid
- Direct financial loss arising from the negligence of the IT Company
- Consequential loss
Insurers’ first line of defence is the written contract between the insured and their client. Insurers will often ask to see the insured’s standard terms and conditions. If smaller IT firms are asked to sign onerous contracts with larger customers it is important for the insured to understand the extent of cover offered to meet these contractual liabilities. Whilst cover for the first two types of claims mentioned above are available in the market, insurers expect that consequential losses will be excluded by the insured in their contract terms and conditions, or at least limited.
The prime underwriting criteria is of course what kinds of systems an IT professional is involved in. Areas that must always be disclosed to insurers include:
- Systems in the financial sector
- Games development
- Trading systems
- Process control systems
- ASPs (Application Services Provider) or ISPs (Internet Services Providers)
- Managed Service Providers
- Enterprise Resource Planners
- Large contract sizes
- Mission and safety critical systems
- Cases with US exposure