In the purview of IT services, India is the top outsourcing destination thanks to improved IT infrastructure over the years and the procurement of talented pool of resources at a competitive price point. Ever since the economic liberalization in the 1990’s, there has been a sharp growth in the Indian economy where there are more jobs in the market. People have since moved away from stands clerical jobs and are taking up more complex and dynamic assignments that require expertise and professional training. Jobs like software engineering, graphic designing, business consultation, digital marketing are some high paying careers people are opting today. Although, these jobs have changed the fabric of human resources and the job spectrum, it has also brought with it greater accountability and onus of responsibility.
For instance, most IT companies work for clients that have their businesses overseas or domestically. Either way, IT projects are highly complex in nature and require the expertise of ace programmers, designer, and testers whose job is to ensure that the product functions properly through various stages of development. Nonetheless, sometimes a glitch can happen, for instance overlooking a dangerous bug that has crashed the system or a delay in project delivery. Both scenarios can have immense loss to the client and there are instances where service agencies have been sued for lakhs of rupees. Representing oneself in such litigation as well as paying hefty amount as pay-out can cause immense loss to a firm. However, if a company has opted for professional liability insurance, the insurer provides cover against the liability, thus protecting the assets of an enterprise.
Although, professional liability insurance is a highly popular corporate insurance product in the West, in India, majorly big companies initiate taking such schemes. However, in reality, this insurance product is more viable for small and medium-sized enterprises (SMEs) or even independent consultants. While most big firms have their legal cell and team of advisors to handle professional liability litigation, SMEs do not enjoy that luxury, thus making them more vulnerable. Therefore, the purpose of this write-up is to not only emphasize the importance of professional liability insurance in today’s complex business eco-system but also clear the air about this insurance policy.
What does professional indemnity insurance policy covers?
Professional indemnity insurance provides comprehensive cover against a different kind of liability emerging due to error and omission leading to loss of important data and information, failure of deliver or any lacking while rendering a professional service.
What are the benefits the policy offer?
The policy offer’s exhaustive coverage against –
1. Risks entailed by different professional groups and services
2. Cost of legal cover and expenses
3. Instances of defamation and denouncements
4. Cases related to infringement of intellectual property rights
5. Cost of claim investigation
How real are these risks?
Professional liability risks are indeed real. For instance, you are the owner of an IT company that provides cloud computing service in the area of customer relationship management or CRM to various clients. Due to inadequate security measures or an overlooked bug, the data has been compromised by an external party and confidential customer information is released on a public domain. All this has affected the branding at the same time incurred a huge business loss to your client, and you are a service provider is slammed with a lawsuit.
What do you do in such a case? You are likely engaging a legal service for representation in the court of law and if the final verdict is against your company, you will also be liable to pay compensation out of your pocket. Conversely, if you have taken professional liability insurance, the insurer will bear all the cost, thus protecting the assets of your company.
Besides, unintended errors and omissions, there are incidents where the employee of the company is involved in fraudulence and data theft that results in falling of customer information in the hand of the competitor of your client. These risks by no means are exaggerated and pose a real threat to IT service providers.
Is there any exclusion under the policy?
While professional liability insurance cover provides comprehensive indemnity, there are some exclusions that one should not amiss. Some standard exclusions under the policy are stated as below –
1. Any criminal act of violation of law
2. Pure financial losses such as loss of goodwill or market share
3. Bodily injuries or damage of tangible property
4. War and nuclear perils
Is professional liability insurance only meant for the IT sector?
As the name signifies, professional liability insurance can be opted by professional from any field of expertise. The policy can be taken by IT firms, BOP sector, engineers, accountants, lawyers, doctors, independent consultants and even fitness trainers and yoga instructors.
Where can one buy professional liability insurance company from?
There are a number of insurance companies in India, such as ICICI Lombard, TATA AIG Insurance, New India Assurance, Bajaj Allianz General, HDFC Ergo, that offer professional indemnity insurance policy. You can procure this insurance policy online, however, its best to get in touch with insurance brokerage firm such as SecureNow, who have a team of underwriters that will conduct a risk assessment and help you get a policy tailor-made for your need.