In the latest research carried out by PolicyBee, it was found that small businesses are quite perplexed with Professional Indemnity Insurance and it causes quite the confusion. This confusion and lack of understanding resulted in around 40% of respondents not getting a professional indemnity cover, leaving them exposed.
Out of those 40% that didn’t seek this type of cover, around 30% stated that they had not ever previously heard of Professional Indemnity Insurance. The rest (70%) thought that they didn’t actually need the cover. This is a huge number of respondents that lack the fundamental understanding of the cover, which has resulted in a lack of Professional Indemnity Insurance policies being taken out amongst small business owners.
What does Professional Indemnity Insurance mean?
It was found that the name of the cover itself ‘Professional Indemnity Insurance’ is confusing and a lot of the small business owners didn’t know what it meant. Around 95% of small businesses couldn’t correctly explain the meaning of the word indemnity. The definition of the word is: “security or protection against a loss or other financial burden.” One in ten thought that the word ‘professional’ was also misleading, as it didn’t only apply to professional industries such as accountants, lawyers and architects.
New name for the cover
Four in five small businesses favoured a new name for the type of cover that protects the individual should their client face loss due to their work. The names suggested include Professional Liability Insurance, favoured by 30%, Errors and Omission Insurance, favoured by 14% and Business Advice and Service Protection Insurance, favoured by 10%.
The new name suggestions are names commonly used for Professional Indemnity Insurance in the US. Small business participants from the survey felt that having a name that was easily understandable would encourage more of the self-employed to get the cover and protect themselves.
Easier name will mean a better understanding
Kerri-Ann Hockley from PolicyBee commented: “It’s particularly interesting that the US product names for professional indemnity insurance resonate so well with a UK audience. We know that small businesses are looking for simplicity, reassurance, and peace of mind from their insurance policies and it’s vital that we as an industry recognise that confusion is created by overly-complicated product names and policies.
“Being straightforward in the language we use will lead to better understanding and knowledge and therefore should lead to better product penetration, meaning fewer small businesses will be left under- or uninsured.”
Surprisingly, it was found from the research that small businesses that had the Professional Indemnity Insurance still thought it wasn’t essential. Therefore, they had only taken out the cover when they had hired staff or their first employee when they thought there was more room for error and greater risk.
This research has shown how the insurance industry needs to do more to educated small businesses on Professional Indemnity Insurance. There are a vast number of small businesses that are exposed to fines and legal action due to lack of cover.