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IT consultants professional indemnity insurance, IT consultants PI cover

IT consultants professional indemnity insurance

IT consultants professional indemnity insurance has become increasingly necessary in today’s litigious world.

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.

We have a wealth of experience providing IT Consultants Professional Indemnity insurance and 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
  • Outsourcing
  • IT recruitment
  • Internet services

What do insurers look for when assessing the risk?

Size of firm – One of the major factors that determine insurers’ rating and underwriting criteria is the size of the practice. This is mainly established in two ways, the number of directors and staff and the gross annual income of the firm.

Qualifications and experience – The IT industry does not have a governing body and there are no standards of qualification. Therefore underwriters will look for a mix of qualifications and experience and a CV of the directors or principals will often help underwriters when they assess the risk.

Potential for loss – The central question is what would be the immediate financial loss, and other consequences, if data is incorrect, a system fails or becomes unavailable for any period of time. Much depends on the precise function of the software and the 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 which it was intended for (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

Things to bear in mind when looking for IT consultants professional indemnity insurance:

Written contracts – 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 claim are available in the market, insurers often expect that consequential losses will be excluded, or at least limited, by insured in their contract terms and conditions.

Type of client – A prime underwriting criteria is what kinds of businesses an IT professional is involved in. Areas of particular concern to insurers include:

  • The financial sector
  • Games development
  • Trading systems
  • Process control systems
  • ASPs (Application Services Provider) or ISPs (Internet Services Providers)
  • Managed Service Providers
  • Mission and safety critical systems

Contract sizes – There is a direct relationship between the size and complexity of the job and the exposure.

Retroactive exposure – Does the firm have an exposure to claims arising from past work, whether in the current firm or a former practice?

Claims experience – The claims experience is an important determining factor in the assessment of risk. This information usually reflects the type of work carried out by a firm. It also reflects the quality of the firm’s work, staff, internal risk management and experience.

The usual cover:

There are commonly separately identified heads of cover for claims due to:

  • Professional negligence
  • Negligent misstatement or negligent misrepresentation
  • Failure of software to be fit for purpose
  • Infringement of intellectual property rights
  • Breach of confidence, misuse of confidential information
  • Defamation
  • Dishonesty of employees

Exclusions

  • Failure of any inherent defect in a third party

Contact us now for more information on IT Consultants Professional Indemnity insurance

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