In an increasingly complex and litigious business environment, Professional Indemnity Insurance (PII) is no longer just a consideration it is a necessity.

Whether you’re a consultant, contractor, designer, or adviser, even spurious allegations of a professional error or omission, can be very expensive to defend, let alone pay for damages that may be awarded.

Last month, a high-profile case involving a Leeds, UK-based digital marketing agency made headlines after its client sued for damages exceeding £250,000 over alleged negligence in work undertaken on a campaign strategy and delivery. The agency faced reputational damage, legal costs, and potential bankruptcy but  their Professional Indemnity Insurance policy covered the legal defence costs as well as the settlement, allowing them to survive the storm.

Similarly, a recent CIPFA report highlighted a 22% year-on-year increase in claims made against financial and consulting professionals. The rise in remote work, complex digital environments, and stricter client expectations has made even the most careful businesses vulnerable to costly claims.

What Does PII Actually Cover?

Professional Indemnity Insurance is designed to protect the professional services undertaken by your business and typically can include cover for:

• Negligence or breach of duty of care
• Breach of contract
• Defamation or libel/slander
• Breach of confidentiality
• Loss of documents
• Intellectual property infringement
• In respect of firms involved in the construction sector, additional coverages for rectification costs, liabilities arising under collateral warranties/duty of care agreements and other exposures such as ‘failure to warn` etc…

PII ensures that your business can handle the financial burden of legal defence and compensation payouts.

Regulatory & Contractual Compliance

In many sectors, PII isn’t just advisable  it is mandatory. Accountants, Solicitors, Architects, and Financial Institutions / Advisers even Insurance Brokers cannot operate without proof of adequate PII. Many public and private contracts also stipulate PII as a requirement, making it essential for bidding on new business.

Protecting Your Reputation

Beyond finances, a professional claim can tarnish your brand and erode client trust. Having robust PII in place can help demonstrate your commitment to accountability and professionalism. It reassures clients that you’re prepared for the unexpected and have taken steps to manage risk responsibly.

What SMEs Should Consider

When choosing PII, SMEs should:

• Assess the nature and size of potential claims
• Review their contractual position, both present and historical (as PII works retrospectively)
• Ensure policy limits reflect worst-case scenarios
• Understand exclusions and policy wording
• Review cover annually or when professional services change

By working with a trusted and specialist PII insurance broker who understands your profession, you can tailor a policy that genuinely meets your needs. As risk exposure increases in 2025, SMEs cannot afford to overlook Professional Indemnity Insurance and by investing in the right cover today, you’re safeguarding your business’s tomorrow.

To discuss this further with a broker at W Denis, please make arrangements with Daniel Moss at [email protected] or on 0044 (0)113 2439812.